[House Report 119-170]
[From the U.S. Government Publishing Office]
119th Congress } { Report
HOUSE OF REPRESENTATIVES
1st Session } { 119-170
======================================================================
HALTING UNCERTAIN METHODS AND PRACTICES IN
SUPERVISION ACT OF 2025
_______
June 25, 2025.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Hill of Arkansas, from the Committee on Financial Services,
submitted the following
R E P O R T
together with
MINORITY VIEWS
[To accompany H.R. 3379]
The Committee on Financial Services, to whom was referred
the bill (H.R. 3379) to amend the Federal Financial
Institutions Examination Council Act of 1978 to require the
Federal financial institutions regulatory agencies to update
the CAMELS 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.............................................. 3
Background and Need for Legislation.............................. 3
Committee Consideration.......................................... 3
Related Hearings................................................. 3
Committee Votes.................................................. 4
Committee Oversight Findings..................................... 7
Performance Goals and Objectives................................. 7
Committee Cost Estimate.......................................... 7
New Budget Authority and CBO Cost Estimate....................... 7
Unfunded Mandates Statement...................................... 7
Earmark Statement................................................ 7
Federal Advisory Committee Act Statement......................... 7
Applicability to the Legislative Branch.......................... 8
Duplication of Federal Programs.................................. 8
Section-by-Section Analysis of the Legislation................... 8
Changes in Existing Law Made by the Bill, as Reported............ 9
Minority Views................................................... 19
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 ``Halting Uncertain Methods and
Practices in Supervision Act of 2025'' or the ``HUMPS Act of 2025''.
SEC. 2. FINDINGS.
Congress finds that--
(1) CAMELS ratings (Capital adequacy, Asset quality,
Management, Earnings, Liquidity, and Sensitivity to market
risk) are a critical tool for evaluating the safety and
soundness of financial institutions, and the basis for
determining significant regulatory matters such as the
evaluation for mergers and acquisitions and a bank's deposit
insurance premiums;
(2) the CAMELS rating system relies heavily on examiner
judgment, which can lead to subjective and inconsistent ratings
across similar institutions;
(3) establishing clear, objective measures for each CAMELS
component and their relative weighting in determining composite
ratings will promote fairness, consistency, and accountability
in supervisory assessments; and
(4) examination and supervision, as well as the CAMELS rating
system, should focus on a financial institution's core
financial condition or solvency.
SEC. 3. AMENDMENTS TO THE CAMELS RATING SYSTEM.
(a) In General.--The Federal Financial Institutions Examination
Council Act of 1978 (12 U.S.C. 3301 et seq.) is amended by adding at
the end the following:
``SEC. 1012. AMENDMENTS TO THE CAMELS RATING SYSTEM.
``(a) In General.--The Council shall make recommendations to amend
the Uniform Financial Institutions Rating System, and the CAMELS
components thereunder, to--
``(1) establish clear and objective criteria for assessing
each CAMELS component;
``(2) revise the factors affecting each CAMELS component to
derive a composite rating that more accurately reflects the
financial condition and risk profile of the financial
institutions being rated;
``(3) either--
``(A) eliminate the management component of the
CAMELS rating system; or
``(B) revise the management component of the CAMELS
rating system to limit the assessment under such
component to objective measures of the governance and
controls used to manage an institution's risk profile;
``(4) ensure that composite ratings consider the financial
institution's compliance with--
``(A) section 21 of the Federal Deposit Insurance Act
(12 U.S.C. 1829b);
``(B) chapter 2 of title I of Public Law 91-508 (12
U.S.C. 1951 et seq.);
``(C) subchapter II of chapter 53 of title 31, United
States Code; and
``(D) any other applicable requirements and
implementing regulations relating to the prevention of
money laundering and terrorist financing; and
``(5) ensure that composite ratings are determined based on a
transparent methodology that is limited to the objective
criteria established for each CAMELS component.
``(b) Rulemaking.--Not later than 12 months after the Council makes
the recommendations required under subsection (a), the Federal
financial institutions regulatory agencies shall, jointly, issue rules
to carry out the recommendations described under subsection (a).
``(c) Public Comment Period.--In issuing the rules required under
subsection (b), the Federal financial institutions regulatory agencies
shall--
``(1) publish a notice of proposed rulemaking with respect to
such rules; and
``(2) provide for a public comment period of not less than 90
days.
``(d) Rule of Construction.--Nothing in this section may be construed
to limit the authority of the Federal financial institutions regulatory
agencies to take supervisory or enforcement actions to ensure the
safety and soundness of financial institutions.''.
(b) Well Managed Definition.--Section 2(o)(9)(A) of the Bank Holding
Company Act of 1956 (12 U.S.C. 1841(o)(9)(A)) is amended--
(1) by striking ``achievement of'' and all that follows
through ``a CAMEL'' and inserting ``achievement of a CAMEL'';
(2) by striking ``; and'' and inserting a period; and
(3) by striking clause (ii).
Purpose And Summary
Introduced on May 14, 2025, by Representative Scott
Fitzgerald (WI-05), H.R. 3379, the Halting Uncertain Methods
and Practices in Supervision (HUMPS) Act of 2025, requires the
Federal Financial Institutions Examination Council (FFIEC) to
develop formal recommendations to revise the CAMELS rating
system. Federal banking regulators would then be required to
implement the recommendations through joint rulemakings.
Background and Need for Legislation
The CAMELS rating system--comprising Capital adequacy,
Asset quality, Management, Earnings, Liquidity, and Sensitivity
to market risk--was established by the FFIEC in 1979 as a tool
for evaluating the safety and soundness of financial
institutions. Despite its longstanding use, the system has been
criticized for its heavy reliance on examiner judgment and
subjective metrics, which can lead to inconsistent ratings
across institutions of similar risk profiles. In particular,
the Management component often acts as a vague ``catch-all''
that allows for supervisory downgrades based on non-material or
intangible concerns. These ratings have far-reaching
implications, affecting matters such as merger approvals,
deposit insurance premiums, and enforcement decisions.
Subjectivity in the CAMELS framework undermines transparency,
accountability, and consistency in the supervisory process. The
HUMPS Act seeks to address these concerns by directing
regulators to adopt clear, objective standards that better
reflect a financial institution's solvency and risk profile. By
modernizing the rating framework, the legislation aims to
improve the fairness of bank evaluations while preserving
regulatory tools necessary to ensure safety and soundness.
Committee Consideration
119TH CONGRESS
On May 14, 2025, Representative Fitzgerald introduced H.R.
3379, the Halting Uncertain Methods and Practices in
Supervision (HUMPS) Act of 2025. The bill was referred solely
to the Committee on Financial Services. The bill was attached
to the April 29, 2025, hearing titled, ``Regulatory Overreach:
The Price Tag on American Prosperity.''
On May 21, 2025, the Committee on Financial Services met in
open session to consider, among others, H.R. 3379. The
Committee favorably reported H.R. 3379, as amended to the House
of Representatives.
Related Hearings
Pursuant to clause 3(c)(6) of rule XIII of the Rules of the
House of Representatives, the following hearing was used to
develop H.R. 3379:
The Subcommittee on Financial Institutions of the Financial
Services Committee held a hearing on April 29, 2025, entitled
``Regulatory Overreach: The Price Tag on American Prosperity.''
A discussion draft version of the bill was considered in this
hearing. The following witnesses testified: Ms. Sarah Christine
Flowers, Senior Vice President, Senior Associate General
Counsel, Bank Policy Institute; Mr. J. Michael Radcliffe,
Chairman and Chief Executive Officer, Community Financial
Services Bank (Benton, KY); Ms. Margaret E. Tahyar, Partner,
Head of Financial Institutions Group, Davis Polk & Wardwell
LLP; The Honorable Graham Steele, Academic Fellow, Rock Center
for Corporate Governance, Stanford Law School.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee Report to include for
each record vote on a motion to report the measure or matter
and on any amendments offered to the measure or matter the
total number of votes for and against and the names of the
Members voting for and against.
On May 21, 2025, the Committee ordered H.R. 3379, as
amended, to be reported favorably to the House by a recorded
vote of 29 yeas and 23 nays, a quorum being present. (Record
Vote No. FC-126).
The Committee considered the following amendments to H.R.
3379:
Representative Fitzgerald offered an
amendment in the nature of a substitute, which
clarified language related to supervisory rating
factors, explicitly requiring that composite ratings
consider compliance with anti-money laundering and
counter-terrorist financing laws. The amendment also
extended the deadline for issuing final reports from 60
days to 90 days. This amendment was adopted by a voice
vote.
Ranking Member Maxine Waters (D-CA) offered
an amendment (No. 6), designated AMEND_HR3379_15. This
amendment would prohibit any changes to the CAMELS
rating system recommended by the FFIEC from being
applied to insured depository institutions with over $1
trillion in assets or to institutions that have
violated federal law or regulations in a manner that,
in the aggregate, harmed one million or more consumers.
This amendment failed by a recorded vote of 23 yeas and
29 nays, a quorum being present. (Record Vote No. FC-
125).
Committee Oversight Findings
Pursuant to clause 3(c) 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 goal of H.R. 3379 is to establish
objective, quantifiable criteria for each CAMELS component,
revise the weighting methodology to better reflect actual risk,
and either eliminate or narrow the scope of the Management
component.
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. 3379. The
Committee has requested but not received a cost estimate from
the Director of the Congressional Budget Office. However,
pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee will adopt as its own
the cost estimate by the Director of the Congressional Budget
Office once it has been prepared.
New Budget Authority and CBO Cost Estimate
With respect to the requirements of 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 with respect
to requirements of 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, a cost estimate was not made
available to the Committee in time for the filing of this
report. The Chairman of the Committee shall cause such estimate
to be printed in the Congressional Record upon its receipt by
the Committee.
Unfunded Mandates Statement
The Committee has requested but not received from the
Director of the Congressional Budget Office an estimate of the
Federal mandates pursuant to section 423 of the Unfunded
Mandates Reform Act. The Committee will adopt the estimate once
it has been prepared by the Director.
Earmark Statement
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 resolution 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.
Federal Advisory Committee Act Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Applicability to the 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 section
102(b)(3) of the Congressional Accountability Act.
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 the bill establishes or reauthorizes a program of
the Federal Government known to be duplicative of another
Federal program, including any program that was included in a
report to Congress pursuant to section 21 of the Public Law
111-139 or the most recent Catalog of Federal Domestic
Assistance.
Section-by-Section Analysis of the Legislation
Section 1. Short title
This section designates the short title as the ``Halting
Uncertain Methods and Practices in Supervision Act of 2025'' or
the ``HUMPS Act of 2025''.
Section 2. Findings
This section provides congressional findings, including:
The CAMELS ratings system (Capital adequacy,
Asset quality, Management, Earnings, Liquidity, and
Sensitivity to market risk) is a critical tool used to
assess the safety and soundness of financial
institutions and to inform significant regulatory
decisions such as mergers, acquisitions deposit
insurance premiums;
CAMELS ratings depend heavily on examiner
discretion, which can result in subjective and
inconsistent ratings across similar institutions;
Establishing clear, objective measures for
each CAMELS component and their relative weighting in
determining composite ratings will promote fairness,
consistency, and accountability in supervisory
assessments; and
Examination and supervision, as well as the
CAMELS rating system, should focus on a financial
institution's core financial condition or solvency.
Section 3. Amendments to the Camels Rating System
This section amends the Federal Financial Institutions
Examination Council Act of 1978 to require the Council to
recommend updates to the Uniform Financial Institutions Rating
System and the CAMELS components. These updates must:
Establish clear and objective criteria for
assessing each CAMELS component;
Revise the factors used to assess each
component to more accurately reflect an institution's
financial condition and risk profile;
Either eliminate the management component or
revise it to focus solely on objective measures of
governance and risk controls;
Ensure the composite ratings account for
compliance with anti-money laundering (AML) and
countering the financing of terrorism (CFT) laws,
including section 21 of the Federal Deposit Insurance
Act, chapter 2 of title I of Public Law 91-508,
subchapter II of chapter 53 of title 31, U.S. Code; and
Ensure that the overall rating methodology
is transparent and based exclusively on objective
criteria.
This section also requires that the federal financial
regulators jointly issue implementing rules within 12 months of
the Council's recommendations and provide for a public comment
period of at least 90 days.
This section clarifies that nothing in the Act limits
regulators' authority to take supervisory or enforcement
actions to ensure the safety and soundness of financial
institutions.
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 italics, and existing law in which no
change is proposed is shown in roman):
FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL ACT OF 1978
* * * * * * *
SEC. 1012. AMENDMENTS TO THE CAMELS RATING SYSTEM.
(a) In General.--The Council shall make recommendations to
amend the Uniform Financial Institutions Rating System, and the
CAMELS components thereunder, to--
(1) establish clear and objective criteria for
assessing each CAMELS component;
(2) revise the factors affecting each CAMELS
component to derive a composite rating that more
accurately reflects the financial condition and risk
profile of the financial institutions being rated;
(3) either--
(A) eliminate the management component of the
CAMELS rating system; or
(B) revise the management component of the
CAMELS rating system to limit the assessment
under such component to objective measures of
the governance and controls used to manage an
institution's risk profile;
(4) ensure that composite ratings consider the
financial institution's compliance with--
(A) section 21 of the Federal Deposit
Insurance Act (12 U.S.C. 1829b);
(B) chapter 2 of title I of Public Law 91-508
(12 U.S.C. 1951 et seq.);
(C) subchapter II of chapter 53 of title 31,
United States Code; and
(D) any other applicable requirements and
implementing regulations relating to the
prevention of money laundering and terrorist
financing; and
(5) ensure that composite ratings are determined
based on a transparent methodology that is limited to
the objective criteria established for each CAMELS
component.
(b) Rulemaking.--Not later than 12 months after the Council
makes the recommendations required under subsection (a), the
Federal financial institutions regulatory agencies shall,
jointly, issue rules to carry out the recommendations described
under subsection (a).
(c) Public Comment Period.--In issuing the rules required
under subsection (b), the Federal financial institutions
regulatory agencies shall--
(1) publish a notice of proposed rulemaking with
respect to such rules; and
(2) provide for a public comment period of not less
than 90 days.
(d) Rule of Construction.--Nothing in this section may be
construed to limit the authority of the Federal financial
institutions regulatory agencies to take supervisory or
enforcement actions to ensure the safety and soundness of
financial institutions.
----------
BANK HOLDING COMPANY ACT OF 1956
* * * * * * *
definitions
Sec. 2. (a)(1) Except as provided in paragraph (5) of this
subsection, ``bank holding company'' means any company which
has control over any bank or over any company that is or
becomes a bank holding company by virtue of this Act.
(2) Any company has control over a bank or over any company
if--
(A) the company directly or indirectly or acting
through one or more other persons owns, controls, or
has power to vote 25 per centum or more of any class of
voting securities of the bank or company;
(B) the company controls in any manner the election
of a majority of the directors or trustees of the bank
or company; or
(C) the Board determines, after notice and
opportunity for hearing, that the company directly or
indirectly exercises a controlling influence over the
management or policies of the bank or company.
(3) For the purposes of any proceeding under paragraph (2)(C)
of this subsection, there is a presumption that any company
which directly or indirectly owns, controls, or has power to
vote less than 5 per centum of any class of voting securities
of a given bank or company does not have control over that bank
or company.
(4) In any administrative or judicial proceeding under this
Act, other than a proceeding under paragraph (2)(C) of this
subsection, a company may not be held to have had control over
any given bank or company at any given time unless that
company, at the time in question, directly or indirectly owned,
controlled, or had power to vote 5 per centum or more of any
class of voting securities of the bank or company, or had
already been found to have control in a proceeding under
paragraph (2)(C).
(5) Notwithstanding any other provision of this subsection--
(A) No bank and no company owning or controlling
voting shares of a bank is a bank holding company by
virtue of its ownership or control of shares in a
fiduciary capacity, except as provided in paragraphs
(2) and (3) of subsection (g) of this section. For the
purpose of the preceding sentence, bank shares shall
not be deemed to have been acquired in a fiduciary
capacity if the acquiring bank or company has sole
discretionary authority to exercise voting rights with
respect thereto; except that this limitation is
applicable in the case of a bank or company acquiring
such shares prior to the date of enactment of the Bank
Holding Company Act Amendments of 1970 only if the bank
or company has the right consistent with its
obligations under the instrument, agreement, or other
arrangement establishing the fiduciary relationship to
divest itself of such voting rights and fails to
exercise that right to divest within a reasonable
period not to exceed one year after the date of
enactment of the Bank Holding Company Act Amendments of
1970.
(B) No company is a bank holding company by virtue of
its ownership or control of shares acquired by it in
connection with its underwriting of securities if such
shares are held only for such period of time as will
permit the sale thereof on a reasonable basis.
(C) No company formed for the sole purpose of
participating in a proxy solicitation is a bank holding
company by virtue of its control of voting rights of
shares acquired in the course of such solicitation.
(D) No company is a bank holding company by virtue of
its ownership or control of shares acquired in securing
or collecting a debt previously contracted in good
faith, until two years after the date of acquisition.
The Board is authorized upon application by a company
to extend, from time to time for not more than one year
at a time, the two-year period referred to herein for
disposing of any shares acquired by a company in the
regular course of securing or collecting a debt
previously contracted in good faith, if, in the Board's
judgment, such an extension would not be detrimental to
the public interest, but no such extension shall in the
aggregate exceed three years.
(E) No company is a bank holding company by virtue of
its ownership or control of any State-chartered bank or
trust company which--
(i) is wholly owned by 1 or more thrift institutions
or savings banks; and
(ii) is restricted to accepting--
(I) deposits from thrift institutions or
savings banks;
(II) deposits arising out of the corporate
business of the thrift institutions or savings
banks that own the bank or trust company; or
(III) deposits of public moneys.
(F) No trust company or mutual savings bank which is
an insured bank under the Federal Deposit Insurance Act
is a bank holding company by virtue of its direct or
indirect ownership or control of one bank located in
the same State, if (i) such ownership or control
existed on the date of enactment of the Bank Holding
Company Act Amendments of 1970 and is specifically
authorized by applicable State law, and (ii) the trust
company or mutual savings bank does not after that date
acquire an interest in any company that, together with
any other interest it holds in that company, will
exceed 5 per centum of any class of the voting shares
of that company, except that this limitation shall not
be applicable to investments of the trust company or
mutual savings bank, direct and indirect, which are
otherwise in accordance with the limitations applicable
to national banks under section 5136 of the Revised
Statutes. (12 U.S.C. 24)
(6) For the purposes of this Act, any successor to a bank
holding company shall be deemed to be a bank holding company
from the date on which the predecessor company became a bank
holding company.
(b) ``Company'' means any corporation, partnership, business
trust, association, or similar organization, or any other trust
unless by its terms it must terminate within twenty-five years
or not later than twenty-one years and ten months after the
death of individuals living on the effective date of the trust,
but shall not include any corporation the majority of the
shares of which are owned by the United States or by any State,
and shall not include a qualified family partnership. ``Company
covered in 1970'' means a company which becomes a bank holding
company as a result of the enactment of the Bank Holding
Company Act Amendments of 1970 and which would have been a bank
holding company on June 30, 1968, if those amendments had been
enacted on that date.
(c) Bank Defined.--For purposes of this Act--
(1) In general.--Except as provided in paragraph (2),
the term ``bank'' means any of the following:
(A) An insured bank as defined in section
3(h) of the Federal Deposit Insurance Act.
(B) An institution organized under the laws
of the United States, any State of the United
States, the District of Columbia, any territory
of the United States, Puerto Rico, Guam,
American Samoa, or the Virgin Islands which
both--
(i) accepts demand deposits or
deposits that the depositor may
withdraw by check or similar means for
payment to third parties or others; and
(ii) is engaged in the business of
making commercial loans.
(2) Exceptions.--The term ``bank'' does not include
any of the following:
(A) A foreign bank which would be a bank
within the meaning of paragraph (1) solely
because such bank has an insured or uninsured
branch in the United States.
(B) An insured institution (as defined in
subsection (j)).
(C) An organization that does not do business
in the United States except as an incident to
its activities outside the United States.
(D) An institution that functions solely in a
trust or fiduciary capacity, if--
(i) all or substantially all of the
deposits of such institution are in
trust funds and are received in a bona
fide fiduciary capacity;
(ii) no deposits of such institution
which are insured by the Federal
Deposit Insurance Corporation are
offered or marketed by or through an
affiliate of such institution;
(iii) such institution does not
accept demand deposits or deposits that
the depositor may withdraw by check or
similar means for payment to third
parties or others or make commercial
loans; and
(iv) such institution does not--
(I) obtain payment or payment
related services from any
Federal Reserve bank, including
any service referred to in
section 11A of the Federal
Reserve Act; or
(II) exercise discount or
borrowing privileges pursuant
to section 19(b)(7) of the
Federal Reserve Act.
(E) A credit union (as described in section
19(b)(1)(A)(iv) of the Federal Reserve Act).
(F) An institution, including an institution
that accepts collateral for extensions of
credit by holding deposits under $100,000, and
by other means which--
(i) engages only in credit card
operations;
(ii) does not accept demand deposits
or deposits that the depositor may
withdraw by check or similar means for
payment to third parties or others;
(iii) does not accept any savings or
time deposit of less than $100,000;
(iv) maintains only one office that
accepts deposits; and
(v) does not engage in the business
of making commercial loans, other than
credit card loans that are made to
businesses that meet the criteria for a
small business concern to be eligible
for business loans under regulations
established by the Small Business
Administration under part 121 of title
13, Code of Federal Regulations.
(G) An organization operating under section
25 or section 25(a) of the Federal Reserve Act.
(H) An industrial loan company, industrial
bank, or other similar institution which is--
(i) an institution organized under
the laws of a State which, on March 5,
1987, had in effect or had under
consideration in such State's
legislature a statute which required or
would require such institution to
obtain insurance under the Federal
Deposit Insurance Act--
(I) which does not accept
demand deposits that the
depositor may withdraw by check
or similar means for payment to
third parties;
(II) which has total assets
of less than $100,000,000; or
(III) the control of which is
not acquired by any company
after the date of the enactment
of the Competitive Equality
Amendments of 1987; or
(ii) an institution which does not,
directly, indirectly, or through an
affiliate, engage in any activity in
which it was not lawfully engaged as of
March 5, 1987,
except that this subparagraph shall cease to
apply to any institution which permits any
overdraft (including any intraday overdraft),
or which incurs any such overdraft in such
institution's account at a Federal Reserve
bank, on behalf of an affiliate if such
overdraft is not the result of an inadvertent
computer or accounting error that is beyond the
control of both the institution and the
affiliate, or that is otherwise permissible for
a bank controlled by a company described in
section 4(f)(1).
(d) ``Subsidiary'', with respect to a specified bank holding
company, means (1) any company 25 per centum or more of whose
voting shares (excluding shares owned by the United States or
by any company wholly owned by the United States) is directly
or indirectly owned or controlled by such bank holding company,
or is held by it with power to vote; (2) any company the
election of a majority of whose directors is controlled in any
manner by such bank holding company; or (3) any company with
respect to the management or policies of which such bank
holding company has the power, directly or indirectly, to
exercise a controlling influence, as determined by the Board,
after notice and opportunity for hearing.
(e) The term ``successor'' shall include any company which
acquires directly or indirectly from a bank holding company
shares of any bank, when and if the relationship between such
company and the bank holding company is such that the
transaction effects no substantial change in the control of the
bank or beneficial ownership of such shares of such bank. The
Board may, by regulation, further define the term ``successor''
to the extent necessary to prevent evasion of the purposes of
this Act.
(f) ``Board'' means the Board of Governors of the Federal
Reserve System.
(g) For the purposes of this Act--
(1) shares owned or controlled by any subsidiary of a
bank holding company shall be deemed to be indirectly
owned or controlled by such bank holding company; and
(2) shares held or controlled directly or indirectly
by trustees for the benefit of (A) a company, (B) the
shareholders or members of a company, or (C) the
employees (whether exclusively or not) of a company,
shall be deemed to be controlled by such company,
unless the Board determines that such treatment is not
appropriate in light of the facts and circumstances of
the case and the purposes of this Act.
(h)(1) Except as provided by paragraph (2), the application
of this Act and of section 23A of the Federal Reserve Act (12
U.S.C. 371), as amended, shall not be affected by the fact that
a transaction takes place wholly or partly outside the United
States or that a company is organized or operates outside the
United States.
(2) Except as provided in paragraph (3), the prohibitions of
section 4 of this Act shall not apply to shares of any company
organized under the laws of a foreign country (or to shares
held by such company in any company engaged in the same general
line of business as the investor company or in a business
related to the business of the investor company) that is
principally engaged in business outside the United States if
such shares are held or acquired by a bank holding company
organized under the laws of a foreign country that is
principally engaged in the banking business outside the United
States. For the purpose of this subsection, the term ``section
2(h)(2) company'' means any company whose shares are held
pursuant to this paragraph.
(3) Nothing in paragraph (2) authorizes a section 2(h)(2)
company to engage in (or acquire or hold more than 5 percent of
the outstanding shares of any class of voting securities of a
company engaged in) any banking, securities, insurance, or
other financial activities, as defined by the Board, in the
United States. This paragraph does not prohibit a section
2(h)(2) company from holding shares that were lawfully acquired
before the date of enactment of the Competitive Equality
Banking Act of 1987.
(4) No domestic office or subsidiary of a bank holding
company or subsidiary thereof holding shares of a section
2(h)(2) company may extend credit to a domestic office or
subsidiary of such section 2(h)(2) company on terms more
favorable than those afforded similar borrowers in the United
States.
(5) No domestic banking office or bank subsidiary of a bank
holding company that controls a section 2(h)(2) company may
offer or market products or services of such section 2(h)(2)
company, or permit its products or services to be offered or
marketed by or through such section 2(h)(2) company, unless
such products or services were being so offered or marketed as
of March 5, 1987, and then only in the same manner in which
they were being offered or marketed as of that date.
(i) Thrift Institution.--For purposes of this Act, the term
``thrift institution'' means--
(1) any domestic building and loan or savings and
loan association;
(2) any cooperative bank without capital stock
organized and operated for mutual purposes and without
profit;
(3) any Federal savings bank; and
(4) any State-chartered savings bank the holding
company of which is registered pursuant to section 408
of the National Housing Act.
(j) Definition of Savings Associations and Related Term.--The
term ``savings association'' or ``insured institution'' means--
(1) any Federal savings association or Federal
savings bank;
(2) any building and loan association, savings and
loan association, homestead association, or cooperative
bank if such association or cooperative bank is a
member of the Deposit Insurance Fund; and
(3) any savings bank or cooperative bank which is
deemed by the appropriate Federal banking agency to be
a savings association under section 10(l) of the Home
Owners' Loan Act.
(k) Affiliate.--For purposes of this Act, the term
``affiliate'' means any company that controls, is controlled
by, or is under common control with another company.
(l) Savings Bank Holding Company.--For purposes of this Act,
the term ``savings bank holding company'' means any company
which controls one or more qualified savings banks if the
aggregate total assets of such savings banks constitute, upon
formation of the holding company and at all times thereafter,
at least 70 percent of the total assets of such company.
(n) Incorporated Definitions.--For purposes of this Act, the
terms ``depository institution'', ``insured depository
institution'', ``appropriate Federal banking agency'',
``default'', ``in danger of default'', and ``State bank
supervisor'' have the same meanings as in section 3 of the
Federal Deposit Insurance Act.
(o) Other Definitions.--For purposes of this Act, the
following definitions shall apply:
(1) Capital terms.--
(A) Insured depository institutions.--With
respect to insured depository institutions, the
terms ``well capitalized'', ``adequately
capitalized'', and ``undercapitalized'' have
the same meanings as in section 38 of the
Federal Deposit Insurance Act.
(B) Bank holding company.--
(i) Adequately capitalized.--With
respect to a bank holding company, the
term ``adequately capitalized'' means a
level of capitalization which meets or
exceeds all applicable Federal
regulatory capital standards.
(ii) Well capitalized.--A bank
holding company is ``well capitalized''
if it meets the required capital levels
for well capitalized bank holding
companies established by the Board.
(C) Other capital terms.--The terms ``Tier
1'' and ``risk-weighted assets'' have the
meanings given those terms in the capital
guidelines or regulations established by the
Board for bank holding companies.
(2) Antitrust laws.--Except as provided in section
11, the term ``antitrust laws''--
(A) has the same meaning as in subsection (a)
of the first section of the Clayton Act; and
(B) includes section 5 of the Federal Trade
Commission Act to the extent that such section
5 relates to unfair methods of competition.
(3) Branch.--The term ``branch'' means a domestic
branch (as defined in section 3 of the Federal Deposit
Insurance Act).
(4) Home state.--The term ``home State'' means--
(A) with respect to a national bank, the
State in which the main office of the bank is
located;
(B) with respect to a State bank, the State
by which the bank is chartered;
(C) with respect to a bank holding company,
the State in which the total deposits of all
banking subsidiaries of such company are the
largest on the later of--
(i) July 1, 1966; or
(ii) the date on which the company
becomes a bank holding company under
this Act;
(D) with respect to a State savings
association, the State by which the savings
association is chartered; and
(E) with respect to a Federal savings
association, the State in which the home office
(as defined by the regulations of the Director
of the Office of Thrift Supervision, or, on and
after the transfer date, the Comptroller of the
Currency) of the Federal savings association is
located.
(5) Host state.--The term ``host State'' means--
(A) with respect to a bank, a State, other
than the home State of the bank, in which the
bank maintains, or seeks to establish and
maintain, a branch; and
(B) with respect to a bank holding company, a
State, other than the home State of the
company, in which the company controls, or
seeks to control, a bank subsidiary.
(6) Out-of-state bank.--The term ``out-of-State
bank'' means, with respect to any State, a bank whose
home State is another State.
(7) Out-of-state bank holding company.--The term
``out-of-State bank holding company'' means, with
respect to any State, a bank holding company whose home
State is another State.
(8) Lead insured depository institutions.--
(A) In general.--The term ``lead insured
depository institution'' means the largest
insured depository institution controlled by
the subject bank holding company at any time,
based on a comparison of the average total
risk-weighted assets controlled by each insured
depository institution during the previous 12-
month period.
(B) Branch or agency.--For purposes of this
paragraph and section 4(j)(4), the term
``insured depository institution'' includes any
branch or agency operated in the United States
by a foreign bank.
(9) Well managed.--The term ``well managed'' means--
(A) in the case of any company or depository
institution which receives examinations, the
[achievement of--]
[(i) a CAMEL] achievement of a CAMEL
composite rating of 1 or 2 (or an
equivalent rating under an equivalent
rating system) in connection with the
most recent examination or subsequent
review of such company or institution[;
and].
[(ii) at least a satisfactory rating
for management, if such rating is
given; or]
(B) in the case of a company or depository
institution that has not received an
examination rating, the existence and use of
managerial resources which the Board determines
are satisfactory.
(10) Qualified family partnership.--The term
``qualified family partnership'' means a general or
limited partnership that the Board determines--
(A) does not directly control any bank,
except through a registered bank holding
company;
(B) does not control more than 1 registered
bank holding company;
(C) does not engage in any business activity,
except indirectly through ownership of other
business entities;
(D) has no investments other than those
permitted for a bank holding company pursuant
to section 4(c);
(E) is not obligated on any debt, either
directly or as a guarantor;
(F) has partners, all of whom are either--
(i) individuals related to each other
by blood, marriage (including former
marriage), or adoption; or
(ii) trusts for the primary benefit
of individuals related as described in
clause (i); and
(G) has filed with the Board a statement that
includes--
(i) the basis for the eligibility of
the partnership under subparagraph (F);
(ii) a list of the existing
activities and investments of the
partnership;
(iii) a commitment to comply with
this paragraph;
(iv) a commitment to comply with
section 7 of the Federal Deposit
Insurance Act with respect to any
acquisition of control of an insured
depository institution occurring after
date of enactment of this paragraph;
and
(v) a commitment to be subject, to
the same extent as if the qualified
family partnership were a bank holding
company--
(I) to examination by the
Board to assure compliance with
this paragraph; and
(II) to section 8 of the
Federal Deposit Insurance Act.
(p) Financial Holding Company.--For purposes of this Act, the
term ``financial holding company'' means a bank holding company
that meets the requirements of section 4(l)(1).
(q) Insurance Company.--For purposes of sections 4 and 5, the
term ``insurance company'' includes any person engaged in the
business of insurance to the extent of such activities.
* * * * * * *
MINORITY VIEWS
This bill, previously referred to as CAMELS Rating
Modernization Act, would require the Federal Financial
Institutions Examination Council (FFIEC) to develop
recommendations and modify their implementation of the CAMELS
ratings framework, where depository institutions are given
composite and component exam ratings for Capital adequacy,
Asset quality, Management, Earnings, Liquidity, and Sensitivity
to market risk (CAMELS).\1\ In doing so, regulators would
either have to eliminate the management component or limit its
use. The bill also eliminates the consideration of management
with respect to certain provisions of the Bank Holding Company
Act, including with respect to acquiring other banks and
expanding the bank's financial activities. This will
significantly diminish the ability to hold bank management
accountable for their actions.
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\1\Federal Reserve Bank of St. Louis, The ABCs of CAMELS (Jul. 23,
2018).
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While large banks argue the management component is too
subjective, being able to fully assess the adequacy of a bank's
management capabilities, especially of a large, complex entity
that enjoys several Federal benefits (deposit insurance, access
to Fed discount window, access to Fed payment systems, etc.)
has always been key to the safe and sound operation of a bank.
Moreover, it is difficult for Congress or the public to assess
whether bank examiners are being fair and consistent with the
ratings they give for management or any aspect of the CAMELS
ratings since these are confidential supervisory information.
To improve accountability, some have proposed publicly
releasing CAMELS ratings, including on a delay.\2\
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\2\See Aaron Klein, Why bank regulators should make their secret
ratings public, Brookings (Feb. 27, 2020); Karen Petrou, Make Camels
Ratings Public Already, American Banker (May 17, 2016); FSC, In Advance
of Wells Fargo Hearings, Waters and Green Release Investigative Report
Exposing Failures of Megabank's Management, Board, and Regulators (Mar.
4, 2020).
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In the aftermath of Silicon Valley Bank's failure in 2023
that required regulators to invoke the systemic risk exception
to prevent contagion from spreading into a larger financial
crisis, the GAO conducted a review of the regulator's
supervision of the bank at the request of former Chairman
McHenry and Ranking Member Waters.\3\ GAO found that Fed
examiners gave SVB many ``2'' ratings between 2018-2022, but by
2022, examiners gave the bank a ``3'' rating for
mismanagement.\4\ GAO and others found that these problems
should have been escalated faster to ensure the bank promptly
addressed its management failures.\5\ If this bill were in
place before then, examiners may have downplayed management
problems if they focused exclusively on quantifiable data.
---------------------------------------------------------------------------
\3\GAO, Bank Regulation: Preliminary Review of Agency Actions
Related to March 2023 Bank Failures (Apr. 28, 2023).
\4\Id.
\5\GAO, Bank Supervision: More Timely Escalation of Supervisory
Action Needed (Mar. 6, 2024).
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Consumer groups like Americans for Financial Reform (AFR)
and Public Citizen are opposed to the bill. Moreover, a former
Treasury official expressed strong concerns in recent
testimony, saying ``A bank's managerial character and capacity
has long been a foundational basis for evaluating whether a
bank is worthy of receiving a charter or federal deposit
insurance. . . . These factors may not be precisely
quantifiable in the way a bank's capital ratio can be
calculated, but we have seen time and again that public
perception and confidence and sound management affect the
stability of banks and the entire banking system . . .''\6\
---------------------------------------------------------------------------
\6\Testimony of The Honorable Graham Steele, former Treasury
Assistant Secretary for Financial Institutions before FSC hearing
entitled, ``Regulatory Overreach: The Price Tag on American
Prosperity'' (Apr. 29, 2025).
---------------------------------------------------------------------------
During the debate, Ranking Member Waters offered an
amendment to exempt megabanks over $1 trillion that a Federal
regulator found in the past 10 years that the bank violated a
federal law or regulation, and that they found the bank harmed
more than 1 million consumers. This would ensure large banks
like Wells Fargo, for example, that have been found to have
repeatedly mismanaged their operations and repeatedly violated
the law, resulting in extensive consumer harm, would continue
to have their management scrutinized by bank regulators. This
amendment was rejected by Republicans.
For these reasons, we oppose H.R. 3379.
Sincerely,
Maxine Waters,
Ranking Member.
Nydia M. Velazquez,
Stephen F. Lynch,
Al Green,
Emanuel Cleaver, II,
Bill Foster,
Joyce Beatty,
Juan Vargas,
Rashida Tlaib,
Sylvia R. Garcia,
Nikema Williams,
Members of Congress.
[all]