Depositor Protection Act of 2023

II 118TH CONGRESS 1ST SESSION S. 1572 To amend the Federal Deposit Insurance Act to address transaction account guarantees, and for other purposes. IN THE SENATE OF THE UNITED STATES MAY 11, 2023 Mr. HAGERTY introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs A BILL To amend the Federal Deposit Insurance Act to address transaction account guarantees, 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 ‘‘Depositor Protection 4 Act of 2023’’. 5 SEC. 2. TRANSACTION ACCOUNT GUARANTEES. 6 (a) IN GENERAL.—Section 11(a)(1) of the Federal 7 Deposit Insurance Act (12 U.S.C. 1821(a)(1)) is amend- 8 ed— 9 (1) in subparagraph (B)— 10 VerDate Sep 11 2014 23:09 May 23, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1572.IS S1572 pbinns on DSKJLVW7X2PROD with $$_JOB 2 •S 1572 IS (A) by striking ‘‘The net amount’’ and in- 1 serting the following: 2 ‘‘(i) IN GENERAL.—Subject to clause 3 (ii), the net amount’’; and 4 (B) by adding at the end the following: 5 ‘‘(ii) INSURANCE FOR NONINTEREST- 6 BEARING TRANSACTION ACCOUNTS.— 7 ‘‘(I) IN GENERAL.—Notwith- 8 standing clause (i), and subject to 9 subclause (II) of this clause, the Cor- 10 poration shall insure the net amount, 11 in an amount that is not more than 12 $100,000,000, that any depositor at 13 an insured depository institution 14 maintains in a noninterest-bearing 15 transaction account. Such amount 16 shall not be taken into account when 17 computing the net amount due to 18 such depositor under clause (i). 19 ‘‘(II) ABILITY OF CERTAIN IN- 20 SURED DEPOSITORY INSTITUTIONS TO 21 OPT-OUT.— 22 ‘‘(aa) IN GENERAL.—An in- 23 sured depository institution that 24 has less than $250,000,000,000 25 VerDate Sep 11 2014 23:09 May 23, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1572.IS S1572 pbinns on DSKJLVW7X2PROD with $$_JOB 3 •S 1572 IS in total consolidated assets may 1 elect not to participate with re- 2 spect to the increased amount of 3 insurance made available under 4 subclause (I). 5 ‘‘(bb) LIMITATION ON AS- 6 SESSMENT OF FEE.—The Cor- 7 poration may not assess a fee on 8 any insured depository institution 9 that elects not to participate with 10 respect to the increased amount 11 of insurance made available 12 under subclause (I). 13 ‘‘(III) DEFINITION.—In this 14 clause, the term ‘noninterest-bearing 15 transaction account’ means a deposit 16 or account maintained at an insured 17 depository institution— 18 ‘‘(aa) with respect to which 19 interest is neither accrued nor 20 paid; 21 ‘‘(bb) on which the depositor 22 or account holder is permitted to 23 make withdrawals by negotiable 24 or transferable instrument, pay- 25 VerDate Sep 11 2014 23:09 May 23, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1572.IS S1572 pbinns on DSKJLVW7X2PROD with $$_JOB 4 •S 1572 IS ment orders of withdrawal, tele- 1 phone or other electronic media 2 transfers, or other similar items 3 for the purpose of making pay- 4 ments or transfers to third par- 5 ties or others; and 6 ‘‘(cc) on which the insured 7 depository institution does not re- 8 serve the right to require advance 9 notice of an intended with- 10 drawal.’’; and 11 (2) in subparagraph (C), by striking ‘‘subpara- 12 graph (B)’’ and inserting ‘‘subparagraph (B)(i)’’. 13 (b) REVERSION.—On the date that is 2 years after 14 the date of enactment of this Act, section 11(a)(1) of the 15 Federal Deposit Insurance Act (12 U.S.C. 1821(a)(1)) is 16 amended— 17 (1) by amending subparagraph (B) to read as 18 follows: 19 ‘‘(B) NET AMOUNT OF INSURED DE- 20 POSIT.—The net amount to any depositor at an 21 insured depository institution shall not exceed 22 the standard maximum deposit insurance 23 amount as determined in accordance with sub- 24 VerDate Sep 11 2014 23:09 May 23, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1572.IS S1572 pbinns on DSKJLVW7X2PROD with $$_JOB 5 •S 1572 IS paragraphs (C), (D), (E), and (F) and para- 1 graph (3).’’; and 2 (2) in subparagraph (C), by striking ‘‘subpara- 3 graph (B)(i)’’ and inserting ‘‘subparagraph (B)’’. 4 SEC. 3. RECIPROCAL DEPOSITS. 5 Section 29(i)(1) of the Federal Deposit Insurance Act 6 (12 U.S.C. 1831f(i)(1)) is amended— 7 (1) in subparagraph (A), by striking 8 ‘‘$5,000,000,000’’ and inserting ‘‘$10,000,000,000’’; 9 and 10 (2) in subparagraph (B), by striking ‘‘20 per- 11 cent’’ and inserting ‘‘25 percent’’. 12 SEC. 4. ADJUSTED LEAST COST RESOLUTION. 13 Section 13(c)(4) of the Federal Deposit Insurance 14 Act (12 U.S.C. 1823(c)(4)) is amended— 15 (1) by redesignating subparagraph (H) as sub- 16 paragraph (I); and 17 (2) by inserting after subparagraph (G) the fol- 18 lowing: 19 ‘‘(H) NON-SYSTEMIC SECONDARY COST TO 20 THE DEPOSIT INSURANCE FUND.— 21 ‘‘(i) DEFINITIONS.—In this subpara- 22 graph: 23 ‘‘(I) LARGE INSURED DEPOSI- 24 TORY INSTITUTION.—The term ‘large 25 VerDate Sep 11 2014 23:09 May 23, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1572.IS S1572 pbinns on DSKJLVW7X2PROD with $$_JOB 6 •S 1572 IS insured depository institution’ means 1 an insured depository institution with 2 total consolidated assets of not less 3 than $100,000,000,000. 4 ‘‘(II) NON-SYSTEMIC SECONDARY 5 COST TO THE DEPOSIT INSURANCE 6 FUND.—The term ‘non-systemic sec- 7 ondary cost to the Deposit Insurance 8 Fund’ means a cost to the Deposit In- 9 surance Fund from— 10 ‘‘(aa) the appointment of the 11 Corporation as a receiver for a 12 second or additional insured de- 13 pository institution as a direct 14 and contemporaneous result of 15 the compliance by the Corpora- 16 tion with subparagraphs (A) and 17 (E) with respect to a large in- 18 sured depository institution, in- 19 cluding the cost of liquidating 20 any such second or additional in- 21 sured depository institution in 22 compliance with subparagraphs 23 (A) and (E); 24 VerDate Sep 11 2014 23:09 May 23, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1572.IS S1572 pbinns on DSKJLVW7X2PROD with $$_JOB 7 •S 1572 IS ‘‘(bb) a reduction in the 1 price of an asset as a direct and 2 contemporaneous result of the 3 liquidation by the Corporation of 4 a large insured depository insti- 5 tution in compliance with sub- 6 paragraphs (A) and (E); or 7 ‘‘(cc) any other direct and 8 contemporaneous result of the 9 compliance by the Corporation 10 with subparagraphs (A) and (E) 11 with respect to a large insured 12 depository institution (other than 13 any such loss that arises from se- 14 rious adverse effects on economic 15 conditions or financial stability 16 within the meaning of subpara- 17 graph (G)). 18 ‘‘(ii) ACTION PERMITTED UPON DE- 19 TERMINATION BY THE BOARD OF DIREC- 20 TORS.— 21 ‘‘(I) IN GENERAL.—Notwith- 22 standing subparagraphs (A) and (E), 23 if the Board of Directors (upon a vote 24 of not less than two-thirds of the 25 VerDate Sep 11 2014 23:09 May 23, 2023 Jkt 039200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1572.IS S1572 pbinns on DSKJLVW7X2PROD with $$_JOB 8 •S 1572 IS members of the Board of Directors) 1 makes a determination described in 2 subclause (II), the Corporation may 3 take action or assistance under para- 4 graph (2) for the purpose of facili- 5 tating— 6 ‘‘(aa) a merger or consolida- 7 tion of the applicable large in- 8 sured depository institution with 9 another insured depository insti- 10 tution; 11 ‘‘(bb) the sale of any or all 12 of the assets of the applicable 13 large insured depository institu- 14 tion; 15 ‘‘(cc) the assumption of any 16 or all of the liabilities of the ap- 17 plicable large insured depository 18 institution by another insured de- 19 pository institution; or 20 ‘‘(dd) the acquisition of the 21 stock of the applicable large in- 22 sured depository institution. 23 ‘‘(II) DETERMINATION DE- 24 SCRIBED.—A determination described 25 VerDate Sep 11 2014 23:09 May 23, 2023 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S1572.IS S1572 pbinns on DSKJLVW7X2PROD with $$_JOB 9 •S 1572 IS in this subclause is a determination 1 that— 2 ‘‘(aa) the compliance by the 3 Corporation with subparagraphs 4 (A) and (E) with respect to a 5 large insured depository institu- 6 tion for which the Corporation 7 has been appointed receiver 8 would result in a non-systemic 9 secondary cost to the Deposit In- 10 surance Fund; and 11 ‘‘(bb) any action or assist- 12 ance under this subparagraph 13 would avoid or mitigate the non- 14 systemic secondary cost to the 15 Deposit Insurance Fund de- 16 scribed in item (aa). 17 ‘‘(iii) ADJUSTED LEAST-COST RESOLU- 18 TION REQUIREMENT.—The Corporation 19 may not take any action or provide any as- 20 sistance under this subparagraph unless 21 the total amount of the expenditures by 22 the Corporation and obligations incurred 23 by the Corporation (including any imme- 24 diate and long-term obligation of the Cor- 25 VerDate Sep 11 2014 23:09 May 23, 2023 Jkt 039200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S1572.IS S1572 pbinns on DSKJLVW7X2PROD with $$_JOB 10 •S 1572 IS poration and any direct or contingent li- 1 ability for future payment by the Corpora- 2 tion) in connection with the taking of that 3 action or provision of that assistance with 4 respect to an insured depository institution 5 is the least costly to the Deposit Insurance 6 Fund, taking into account the non-sys- 7 temic secondary costs to the Deposit Insur- 8 ance Fund that would result without the 9 taking of that action or the provision of 10 that assistance, of all possible methods for 11 meeting the obligations of the Corporation 12 under this section. 13 ‘‘(iv) DOCUMENTATION REQUIRED.— 14 The Chairperson of the Board of Directors 15 shall— 16 ‘‘(I) document any determination 17 under clause (ii); and 18 ‘‘(II) retain the documentation 19 for review under clause (v). 20 ‘‘(v) GAO REVIEW.—The Comptroller 21 General of the United States shall review 22 and report to Congress on any determina- 23 tion under clause (ii), including— 24 VerDate Sep 11 2014 23:09 May 23, 2023 Jkt 039200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S1572.IS S1572 pbinns on DSKJLVW7X2PROD with $$_JOB 11 •S 1572 IS ‘‘(I) the basis for the determina- 1 tion; 2 ‘‘(II) the purpose for which any 3 action was taken pursuant to such 4 clause; and 5 ‘‘(III) the likely effect of the de- 6 termination and such action on the in- 7 centives and conduct of insured depos- 8 itory institutions and uninsured de- 9 positors. 10 ‘‘(vi) NOTICE.— 11 ‘‘(I) IN GENERAL.—Not later 12 than 3 days after making a deter- 13 mination under clause (ii), the Sec- 14 retary of the Treasury shall provide 15 written notice of any determination 16 under clause (ii) to the Committee on 17 Banking, Housing, and Urban Affairs 18 of the Senate and the Committee on 19 Financial Services of the House of 20 Representatives. 21 ‘‘(II) DESCRIPTION OF BASIS OF 22 DETERMINATION.—The notice under 23 subclause (I) shall include a descrip- 24 VerDate Sep 11 2014 23:09 May 23, 2023 Jkt 039200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S1572.IS S1572 pbinns on DSKJLVW7X2PROD with $$_JOB 12 •S 1572 IS tion of the basis for any determination 1 under clause (ii).’’. 2 SEC. 5. ACQUISITIONS OF DISTRESSED BANKS. 3 (a) DEFINITIONS.—In this section: 4 (1) APPROPRIATE FEDERAL BANKING AGENCY; 5 INSURED BANK.—The terms ‘‘appropriate Federal 6 banking agency’’ and ‘‘insured bank’’ have the 7 meanings given the terms in section 3 of the Federal 8 Deposit Insurance Act (12 U.S.C. 1813). 9 (2) BOARD.—The term ‘‘Board’’ means the 10 Board of Governors of the Federal Reserve System. 11 (3) BANK HOLDING COMPANY; CONTROL; SUB- 12 SIDIARY.—The terms ‘‘bank holding company’’, 13 ‘‘control’’, and ‘‘subsidiary’’ have the meanings given 14 the terms in section 2 of the Bank Holding Com- 15 pany Act of 1956 (12 U.S.C. 1841). 16 (4) COVERED ENTITY.—The term ‘‘covered en- 17 tity’’ means— 18 (A) after a transaction described in sub- 19 section (b)(1)(A), the bank holding company of 20 which the applicable distressed insured bank 21 has become a subsidiary; 22 (B) after a transaction described in sub- 23 section (b)(1)(B), the bank holding company 24 VerDate Sep 11 2014 23:09 May 23, 2023 Jkt 039200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S1572.IS S1572 pbinns on DSKJLVW7X2PROD with $$_JOB 13 •S 1572 IS that has acquired the direct or indirect owner- 1 ship or control described in that provision; and 2 (C) after a merger or consolidation de- 3 scribed in subsection (b)(1)(C), the bank hold- 4 ing company that results because of that merg- 5 er or consolidation. 6 (5) DISTRESSED INSURED BANK.—The term 7 ‘‘distressed insured bank’’ means an insured bank 8 that has a class of equity securities, or is controlled, 9 directly or indirectly, by a company that has a class 10 of equity securities— 11 (A) registered pursuant to section 12(b) of 12 the Securities Exchange Act of 1934 (15 13 U.S.C. 78l(b)); and 14 (B) the price of which on a national securi- 15 ties exchange has declined not less than 20 per- 16 cent at any time on or after March 1, 2023, as 17 compared with the highest price of those securi- 18 ties on that exchange on or after March 1, 19 2023. 20 (6) EQUITY SECURITY; EXCHANGE.—The terms 21 ‘‘equity security’’ and ‘‘exchange’’ have the meanings 22 given the terms in section 3(a) of the Securities Ex- 23 change Act of 1934 (15 U.S.C. 78c(a)). 24 VerDate Sep 11 2014 23:09 May 23, 2023 Jkt 039200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\S1572.IS S1572 pbinns on DSKJLVW7X2PROD with $$_JOB 14 •S 1572 IS (7) NATIONAL SECURITIES EXCHANGE.—The 1 term ‘‘national securities exchange’’ means an ex- 2 change that is registered in accordance with section 3 6 of the Securities Exchange Act of 1934 (15 U.S.C. 4 78f). 5 (8) TOTAL CONSOLIDATED ASSETS.—The term 6 ‘‘total consolidated assets’’ means, with respect to an 7 entity, the total consolidated assets of that entity, as 8 determined pursuant to the instructions of Form FR 9 Y–9C of the Board. 10 (b) TEMPORARY WAIVER OF REGULATORY APPROV- 11 ALS FOR ACQUISITIONS OF DISTRESSED BANKS.— 12 (1) IN GENERAL.—Subject to paragraphs (2) 13 and (3), except as provided in paragraph (4), and 14 notwithstanding any requirement or restriction relat- 15 ing to notification, approval, or other matter under 16 section 3 or 4 of the Bank Holding Company Act of 17 1956 (12 U.S.C. 1842, 1843), section 7(j) or 18(c) 18 of the Federal Deposit Insurance Act (12 U.S.C. 19 1817(j), 1828(c)), or any other Federal or State 20 law, after written notice to the Board— 21 (A) a distressed [Text truncated for display. Full text available on Congress.gov.]