Systemic Risk Mitigation Act of 2020

I 116TH CONGRESS 2D SESSION H. R. 6501 To strengthen the Financial Stability Oversight Council, and for other purposes. IN THE HOUSE OF REPRESENTATIVES APRIL 14, 2020 Mr. GARCI´A of Illinois (for himself, Ms. PORTER, Mr. GRIJALVA, Ms. SCHA- KOWSKY, Mr. MCGOVERN, Ms. NORTON, and Mr. DANNY K. DAVIS of Illinois) introduced the following bill; which was referred to the Com- mittee on Financial Services A BILL To strengthen the Financial Stability Oversight Council, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Systemic Risk Mitiga- 4 tion Act of 2020’’. 5 SEC. 2. MEMBER AGENCY FINANCIAL STABILITY MANDATE. 6 (a) IN GENERAL.—Subtitle A of the Financial Sta- 7 bility Act of 2010 (12 U.S.C. 5321 et seq.) is amended 8 by adding at the end the following: 9 VerDate Sep 11 2014 01:53 Apr 21, 2020 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H6501.IH H6501 pamtmann on DSKBC07HB2PROD with BILLS 2 •HR 6501 IH ‘‘SEC. 124. MEMBER AGENCY FINANCIAL STABILITY MAN- 1 DATE. 2 ‘‘Each member agency shall have, as part of the 3 agency’s mission, a mandate to ensure the financial sta- 4 bility of the United States.’’. 5 (b) CLERICAL AMENDMENT.—The table of contents 6 for the Dodd-Frank Wall Street Reform and Consumer 7 Protection Act is amended by inserting after the item re- 8 lating to section 123 the following: 9 ‘‘Sec. 124. Member agency financial stability mandate.’’. SEC. 3. AUTOMATIC DESIGNATION OF CERTAIN LARGE 10 NONBANK FINANCIAL COMPANIES. 11 (a) IN GENERAL.—The Financial Stability Act of 12 2010 (12 U.S.C. 5311 et seq.) is amended by inserting 13 after section 113 the following: 14 ‘‘SEC. 113A. AUTOMATIC DESIGNATION OF CERTAIN LARGE 15 NONBANK FINANCIAL COMPANIES. 16 ‘‘(a) NOTICE OF AUTOMATIC DESIGNATION.—If a 17 nonbank financial company meets the criteria described in 18 subsection (b), the Council shall notify such nonbank fi- 19 nancial company that if, on the date that is 9 months after 20 the date on which the notice is sent, such nonbank finan- 21 cial company meets the criteria described in subsection 22 (b), such nonbank financial company shall be deemed to 23 be designated as systemically important. 24 ‘‘(b) CRITERIA.— 25 VerDate Sep 11 2014 01:53 Apr 21, 2020 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H6501.IH H6501 pamtmann on DSKBC07HB2PROD with BILLS 3 •HR 6501 IH ‘‘(1) IN GENERAL.—A nonbank financial com- 1 pany meets the criteria described in this subsection 2 if such nonbank financial company satisfies— 3 ‘‘(A) the asset criteria in paragraph (2) 4 and the other criteria in paragraph (3); or 5 ‘‘(B) the criteria for an investment adviser 6 that is registered with the Commission under 7 the Investment Advisers Act of 1940 in para- 8 graph (4). 9 ‘‘(2) ASSET CRITERIA.—A nonbank financial 10 company satisfies the asset criteria in this para- 11 graph if such nonbank financial company has— 12 ‘‘(A) in the case of a company that would 13 be an investment company (as defined in the 14 Investment Company Act of 1940) but for sec- 15 tion 3(c)(1) or 3(c)(7) of that Act, 16 $400,000,000,000 or more in gross notional ex- 17 posure (as defined in Form PF) individually or 18 in combination with any feeder funds, parallel 19 funds, or dependent parallel managed accounts 20 of the company; or 21 ‘‘(B) in the case of any nonbank financial 22 company not described under subparagraph (A) 23 or paragraph (4), $50,000,000,000 or more in 24 consolidated assets. 25 VerDate Sep 11 2014 01:53 Apr 21, 2020 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H6501.IH H6501 pamtmann on DSKBC07HB2PROD with BILLS 4 •HR 6501 IH ‘‘(3) OTHER CRITERIA.—A nonbank financial 1 company satisfies the criteria in this paragraph if 2 such nonbank financial company has— 3 ‘‘(A) $30,000,000,000 or more in gross no- 4 tional credit default swaps outstanding for 5 which the nonbank financial company is the ref- 6 erence entity; 7 ‘‘(B) $3,500,000,000 or more of deriva- 8 tives liabilities; 9 ‘‘(C) $20,000,000,000 or more in total 10 debt outstanding; 11 ‘‘(D) a 15–1, or higher, leverage ratio; or 12 ‘‘(E) a 10 percent, or higher, short-term 13 debt ratio. 14 ‘‘(4) INVESTMENT ADVISER CRITERIA.—With 15 respect to an investment adviser that is registered 16 with the Commission under the Investment Advisers 17 Act of 1940, the criteria in this paragraph is that 18 the investment adviser has more than 19 $1,500,000,000,000 in assets under management. 20 ‘‘(c) RESCISSION OF DESIGNATION.— 21 ‘‘(1) IN GENERAL.—With respect to a nonbank 22 financial company designated as systemically impor- 23 tant under subsection (a), if the Council determines 24 that neither material financial distress at the 25 VerDate Sep 11 2014 20:49 Apr 23, 2020 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H6501.IH H6501 pamtmann on DSKBC07HB2PROD with BILLS 5 •HR 6501 IH nonbank financial company, nor the nature, scope, 1 size, scale, concentration, interconnectedness, or mix 2 of the activities of the nonbank financial company, 3 could pose a threat to the financial stability of the 4 United States, the Council may rescind such des- 5 ignation (in this subsection referred to as a ‘rescis- 6 sion determination’) for a period of 2 years. 7 ‘‘(2) AUTHORITY TO RENEW RESCISSION.—The 8 Council may renew a rescission determination made 9 under paragraph (1) for an unlimited number of ad- 10 ditional 2-year periods, if the Council makes a new 11 determination that the nonbank financial company 12 meets the criteria described under paragraph (1) at 13 the beginning of each such renewal. 14 ‘‘(3) AUTHORITY TO REVIEW RESCISSION.—The 15 Chairperson may review the status of a nonbank fi- 16 nancial company with respect to a rescission deter- 17 mination before the end of a 2-year period described 18 under paragraph (1) or (2) for any reason. The 19 Chairperson shall notify the members of the Council 20 of such review and shall call a vote to renew the re- 21 scission determination within 7 days of such notifi- 22 cation. If the Council fails to renew the rescission 23 determination, the nonbank financial company shall 24 VerDate Sep 11 2014 01:53 Apr 21, 2020 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H6501.IH H6501 pamtmann on DSKBC07HB2PROD with BILLS 6 •HR 6501 IH be deemed once again to be designated as system- 1 ically important. 2 ‘‘(d) AUTOMATIC RESCISSION OF DESIGNATION.—If 3 a nonbank financial company does not meet the criteria 4 described in subsection (b) for 9 consecutive months, the 5 Council shall immediately, and automatically rescind the 6 designation of the nonbank financial company as system- 7 ically important. 8 ‘‘(e) APPLICATION.—For purposes of this section, the 9 term ‘nonbank financial company’ does not include a Gov- 10 ernment-sponsored enterprise or an investment company 11 registered with the Commission under the Investment 12 Company Act of 1940. 13 ‘‘(f) DEFINITION.—In this section and with respect 14 to a nonbank financial company, the term ‘designated as 15 systemically important’ means the nonbank financial com- 16 pany is subject to a determination under section 113 that 17 the nonbank financial company shall be supervised by the 18 Board of Governors and shall be subject to prudential 19 standards, in accordance with this title.’’. 20 (b) CLERICAL AMENDMENT.—The table of contents 21 for the Dodd-Frank Wall Street Reform and Consumer 22 Protection Act is amended by inserting after the item re- 23 lating to section 113 the following: 24 ‘‘Sec. 113A. Automatic designation of certain large nonbank financial compa- nies.’’. VerDate Sep 11 2014 20:49 Apr 23, 2020 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6211 E:\BILLS\H6501.IH H6501 pamtmann on DSKBC07HB2PROD with BILLS 7 •HR 6501 IH (c) EFFECTIVE DATE.—This section and the amend- 1 ments made by this section shall take effect not later than 2 9 months after the date of the enactment of this Act. 3 SEC. 4. COUNCIL REGULATION OF SYSTEMICALLY RISKY 4 ACTIVITIES. 5 (a) IN GENERAL.—Subtitle A of the Financial Sta- 6 bility Act of 2010 (12 U.S.C. 5321 et seq.), as amended 7 by section 2, is further amended by adding at the end the 8 following: 9 ‘‘SEC. 125. COUNCIL REGULATION OF SYSTEMICALLY RISKY 10 ACTIVITIES. 11 ‘‘(a) AUTHORITY OF THE COUNCIL.—Subject to sub- 12 section (b), the Council shall issue such rules as may be 13 required to regulate an activity or practice if the Council 14 determines that the conduct, scope, nature, size, scale, 15 concentration, or interconnectedness of such activity or 16 practice could create or increase the risk of significant li- 17 quidity, credit, or other problems spreading among bank 18 holding companies and nonbank financial companies, fi- 19 nancial markets of the United States, or low-income, mi- 20 nority, or under-served communities. 21 ‘‘(b) COUNCIL DELEGATION TO THE PRIMARY REGU- 22 LATOR.—With respect to an activity or practice that the 23 council determines meets the standard outlined in sub- 24 section (a)— 25 VerDate Sep 11 2014 20:49 Apr 23, 2020 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H6501.IH H6501 pamtmann on DSKBC07HB2PROD with BILLS 8 •HR 6501 IH ‘‘(1) the Council shall issue recommendations to 1 the primary regulator for a rulemaking to address 2 the risk posed by the activity, and provide the pri- 3 mary regulator with a 12-month period to issue a 4 final rule to address such risk; and 5 ‘‘(2) if the primary regulator does not issue 6 such a final rule within the period described under 7 paragraph (1) or the Council determines that such 8 final rule is insufficient to address the risk, the 9 Council may— 10 ‘‘(A) terminate such final rule, if applica- 11 ble; and 12 ‘‘(B) issue a rule to address the risk. 13 ‘‘(c) BACKUP AUTHORITY OF THE COUNCIL FOR 14 MEMBER AGENCY RULEMAKINGS.—With respect to any 15 rulemaking required of a member agency by Federal stat- 16 ute, if the member agency does not issue the rule within 17 the time frame required by such Federal statute, the 18 Council may issue such rule in place of the member agen- 19 cy. 20 ‘‘(d) PRIMARY REGULATOR DEFINED.—With respect 21 to an activity, the term ‘primary regulator’ means— 22 ‘‘(1) one or more member agencies that the 23 Council determines are primarily responsible for reg- 24 ulating the activity; or 25 VerDate Sep 11 2014 01:53 Apr 21, 2020 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H6501.IH H6501 pamtmann on DSKBC07HB2PROD with BILLS 9 •HR 6501 IH ‘‘(2) if the Council cannot make a determina- 1 tion under paragraph (1), the member agency that 2 the Council determines is the best choice to serve as 3 the primary regulator with respect to such activity.’’. 4 (b) CLERICAL AMENDMENT.—The table of contents 5 for the Dodd-Frank Wall Street Reform and Consumer 6 Protection Act, as amended by section 2, is further 7 amended by inserting after the item relating to section 8 124 the following: 9 ‘‘Sec. 125. Council regulation of systemically risky activities.’’. SEC. 5. MINIMUM STAFFING AND FUNDING LEVELS FOR 10 THE COUNCIL AND THE OFFICE OF FINAN- 11 CIAL RESEARCH. 12 (a) IN GENERAL.—The Financial Stability Act of 13 2010 (12 U.S.C. 5311 et seq.) is amended— 14 (1) in section 118— 15 (A) in the section heading, by adding 16 ‘‘AND STAFFING’’ at the end; 17 (B) by striking ‘‘Any expenses’’ and insert- 18 ing the following: 19 ‘‘(a) EXPENSES.—Any expenses’’; 20 (C) by inserting after ‘‘Office of Financial 21 Research.’’ the following: ‘‘The Office of Finan- 22 cial Research shall transfer a minimum of 23 $18,000,000 to the Council each year (adjusted 24 for inflation) to pay for the costs of the Council 25 VerDate Sep 11 2014 01:53 Apr 21, 2020 Jkt 099200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H6501.IH H6501 pamtmann on DSKBC07HB2PROD with BILLS 10 •HR 6501 IH in carrying out the duties and responsibilities of 1 the Council.’’; and 2 (D) by adding at the end the following: 3 ‘‘(b) MINIMUM STAFFING LEVELS.—The Council 4 shall maintain a minimum staff of 75 employees.’’; 5 (2) in section 152— 6 (A) in subsection (c), by striking ‘‘, in con- 7 sultation with the Chairperson,’’; and 8 (B) in subsection (d)(1)— 9 (i) by striking ‘‘, in consultation with 10 the Chairperson,’’; and 11 (ii) by inserting before the period at 12 the end the following: ‘‘, except that the 13 Office shall maintain a minimum staff of 14 300 employees’’; 15 (3) in section 153(b)— 16 (A) in paragraph (2), by striking ‘‘and’’ at 17 the end; 18 (B) in paragraph (3), by striking the pe- 19 riod on the end and inserting ‘‘; and’’; and 20 (C) by adding at the end the following: 21 ‘‘(4) require any member agency to produce 22 such data and other information as the Director 23 may determine necessary to carry out the duties of 24 the Office.’’; and 25 VerDate Sep 11 2014 01:53 Apr 21, 2020 Jkt 099200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H6501.IH H6501 pamtmann on DSKBC07HB2PROD with BILLS 11 •HR 6501 IH (4) in section 155(d)— 1 (A) by striking ‘‘the Secretary’’ and insert- 2 ing ‘‘the Office’’; and 3 (B) by adding at the end the following: 4 ‘‘The aggregate amount of assessments under 5 this subsection with respect to a calendar year 6 shall not be less than $168,000,000 (adjusted 7 for inflation).’’. 8 (b) CLERICAL AMENDMENT.—The table of contents 9 for the Dodd-Frank Wall Street Reform and Consumer 10 Protection Act is amended in the item relating to section 11 118 by adding at the end the following: ‘‘and staffing’’. 12 SEC. 6. TRANSPARENCY IN OPERATIONS OF THE FINAN- 13 CIAL STABILITY OVERSIGHT COUNCIL. 14 (a) MEETINGS.—Section 111(e) of the Financial Sta- 15 bility Act of 2010 (12 U.S.C. 5321(e)) is amended— 16 (1) in paragraph (1), by striking ‘‘not less fre- 17 quently than quarterly.’’ and inserting ‘‘not less fre- 18 quently than twice each quarter. At least 1 of such 19 quarterly meetings shall be open to the public.’’; and 20 (2) by adding at the end the following: 21 ‘‘(3) TRANSCRIPTS.—The Council shall publicly 22 release transcripts of meetings held pursuant to 23 paragraph (1) not later than 5 years after the date 24 of such meeting.’’. 25 VerDate Sep 11 2014 01:53 Apr 21, 2020 Jkt 099200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H6501.IH H6501 pamtmann on DSKBC07HB2PROD with BILLS 12 •HR 6501 IH (b) TESTIMONY.—Section 112(c) of the Financial 1 Stability Act of 2010 (12 U.S.C. 5322(c)) is amended— 2 (1) in the subsection heading, by striking ‘‘BY 3 THE CHAIRPERSON’’; and 4 (2) by inserting ‘‘and each voting member of 5 the Council’’ after ‘‘The Chairperson’’. 6 (c) MEMBER AGENCY STATEMENTS.—Section 112 of 7 [Text truncated for display. Full text available on Congress.gov.]