Systemic Risk Mitigation Act - Establishes a framework for a market-based trigger to monitor and regulate the adequacy of bank capital of those bank holding companies whose total consolidated assets are $50 billion or more.
Directs the Board of Governors of the Federal Reserve System to notify a bank holding company whose average daily closing price exceeds either 50 basis points, or 75 basis points, that it must raise additional tier 1 capital in order to reduce such thresholds.
Requires the Board to place into receivership a bank holding company whose average daily closing price exceeds 100 basis points, in accordance with the orderly liquidation authority provided under title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Subjects to receivership a bank holding company that, after notification by the Board, fails to submit an action plan required under this Act.
Sets forth a limitation upon claims of holders of the long-term subordinated debt of a bank holding company that has been placed into receivership.
Directs the Board to require each bank holding company to issue and maintain long-term subordinated debt of at least 15% of its total consolidated assets.
Amends the Bank Holding Company Act of 1956 to repeal prohibitions against proprietary trading and certain relationships with hedge funds and private equity funds.
Amends the Dodd-Frank Wall Street Reform and Consumer Protection Act to repeal requirements for enhanced supervision and prudential standards for Board-supervised nonbank financial companies and certain bank holding companies.
[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[H.R. 613 Introduced in House (IH)]
113th CONGRESS
1st Session
H. R. 613
To establish a market-based trigger to determine the capital adequacy
of bank holding companies and decrease systemic risk, and for other
purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
February 12, 2013
Mr. Campbell introduced the following bill; which was referred to the
Committee on Financial Services
_______________________________________________________________________
A BILL
To establish a market-based trigger to determine the capital adequacy
of bank holding companies and decrease systemic risk, and for other
purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Systemic Risk Mitigation Act''.
SEC. 2. DEFINITIONS.
In this Act:
(1) Average daily closing price.--
(A) In general.--The term ``average daily closing
price'' means the average daily closing price of a
credit default swap on long-term subordinated debt of a
bank holding company during a 30-day period.
(B) Regulations.--The Board, through regulations,
shall develop a method to determine the daily closing
price of a credit default swap on long-term
subordinated debt of a bank holding company and shall
calculate the average daily closing price accordingly.
(2) Bank holding company.--The term ``bank holding
company'' has the same meaning given such term in section 2 of
the Bank Holding Company Act of 1956 (12 U.S.C. 1841), but
shall only include such companies with total consolidated
assets greater than or equal to $50,000,000,000.
(3) Board.--The term ``Board'' means the Board of Governors
of the Federal Reserve System.
(4) Credit default swap.--The term ``credit default swap''
has the same meaning given the term ``swap agreement'' in
section 206A of the Gramm-Leach-Bliley Act (15 U.S.C. 78c nt).
(5) Long-term subordinated debt.--The term ``long-term
subordinated debt'' means unsecured bonds or other debt
instruments issued by a bank holding company that--
(A) is subordinated to the claims of depositors or
general creditors; and
(B) has a maturity date not less than 5 years.
(6) Stress test.--
(A) In general.--The term ``stress test'' means an
evaluation designed by the Board to determine whether a
bank holding company--
(i) has the capital, on a total
consolidated basis, necessary to absorb losses
as a result of adverse economic conditions; and
(ii) is sufficiently capitalized to meet
systemically important obligations.
(B) Regulations.--The term ``systemically important
obligation'' shall be defined in regulations prescribed
by the Board.
(7) Tier 1 capital.--The term ``tier 1 capital'' has the
same meaning given in part 225 of title 12, Code of Federal
Regulations, as in effect on the date of enactment of this Act,
or any successor thereto.
SEC. 3. MARKET-BASED TRIGGER TO DETERMINE ADEQUACY OF CAPITAL.
(a) Market-Based Trigger.--
(1) Greater than 50 basis points.--
(A) In general.--In the case that the average daily
closing price exceeds 50 basis points--
(i) the Board shall notify the bank holding
company that it needs to raise additional tier
1 capital in order to reduce such closing price
below 50 basis points;
(ii) not later than 14 days (or less if the
Board makes a determination that conditions
warrant a shorter period of time) after such
notification under clause (i), such company
shall submit to the Board an action plan
detailing how the company intends on
remediating its capital deficiency;
(iii) such company has 30 days to implement
the plan submitted under clause (ii) after such
plan is approved by the Board; and
(iv) if after the end of the 30-day period
described in clause (iii) the average daily
closing price exceeds 50 basis points, the
Board and such company shall repeat clause (i)
through (iii) until such closing price is less
than or equal to 50 basis points.
(B) Appeal.--
(i) In general.--A bank holding company may
appeal the findings of the Board under
subparagraph (A) and request that the Board
conduct a stress test.
(ii) Tolling.--An appeal made pursuant to
clause (i) shall toll any deadline specified
under subparagraph (A) until the conclusion of
the appeals process.
(iii) Capital deficiency.--If the Board
determines, after conducting a stress test
pursuant to clause (i), that the bank holding
company has a capital deficiency, the Board and
the bank holding company shall repeat clause
(i) through (iii) of subparagraph (A) in
accordance with clause (iv) of such
subparagraph.
(2) Greater than 75 basis points.--In the case that the
average daily closing price exceeds 75 basis points--
(A) the Board shall notify the bank holding company
in accordance with clause (i) of paragraph (1)(A);
(B) such company shall submit and implement an
action plan in accordance with clause (ii) and (iii) of
paragraph (1)(A);
(C) the Board may suspend or limit dividends paid
by the bank holding company until such company's
average daily closing price is less than or equal to 50
basis points;
(D) the Board shall notify the company that it will
be placed into receivership in accordance with
paragraph (3) if the average daily closing price
exceeds 100 basis points;
(E) the Board shall conduct a stress test; and
(F) if the Board determines, after conducting a
stress test pursuant to subparagraph (E), that such
company has a capital deficiency, not later than 14
days (or less if the Board makes a determination that
conditions warrant a shorter period of time) after such
stress test is completed, such company shall submit and
implement an action plan in accordance with clause (ii)
and (iii) of paragraph (1)(A).
(3) Greater than 100 basis points.--In the case that the
average daily closing price exceeds 100 basis points, the Board
shall place the company into receivership in accordance with
the orderly liquidation authority provided under title II of
the Dodd-Frank Wall Street Reform and Consumer Protection Act
(12 U.S.C. 5381 et seq.).
(b) Failure To Submit Action Plan.--A failure by a bank holding
company to submit an action plan pursuant to subsection (a) within the
time period required under such subsection shall result in the Board
placing such company into receivership as described in subsection
(a)(3).
(c) Limitation on Claims for Holders of Long-Term Subordinated
Debt.--Any entity that is a holder of long-term subordinated debt of a
bank holding company that has been placed into receivership pursuant to
this section shall receive the lesser of--
(1) 80 percent of the face value of such debt; or
(2) the residual value of such company after all other
claims of other creditors have been satisfied.
(d) Subordinated Debt Requirement.--
(1) In general.--The Board shall require each bank holding
company to issue and maintain long-term subordinated debt in an
amount greater than or equal to 15 percent of the total
consolidated assets of such company.
(2) Deadline.--A bank holding company shall meet the
requirement set forth in paragraph (1) no later than the
effective date of this section.
(3) Failure to meet requirement.--If a bank holding company
fails to meet the requirement set forth in paragraph (1), such
company shall submit a plan to the Board describing the steps
the company will take to meet such requirement.
(e) Effective Date.--This section shall take effect 2 years after
the date of the enactment of this Act.
SEC. 4. REPEAL.
(a) Prohibitions on Proprietary Trading.--Section 13 of the Bank
Holding Company Act of 1956 (12 U.S.C. 1851) is repealed.
(b) Enhanced Prudential Standards.--Section 165 of the Dodd-Frank
Wall Street Reform and Consumer Protection Act (12 U.S.C. 5365) is
repealed.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Financial Services.
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