12 U.S.C. § 5325 — Enhanced supervision and prudential

Page 1842 TITLE 12—BANKS AND BANKING § 5324 124 Stat. 1391, which is classified principally to this subchapter. For complete classification of title I to the Code, see Short Title note set out under section 5301 of this title and Tables. This Act, referred to in subsec. (c)(6), is Pub. L. 111–203, July 21, 2010, 124 Stat. 1376, known as the Dodd- Frank Wall Street Reform and Consumer Protection Act, which enacted this chapter and chapters 108 (§ 8201 et seq.) and 109 (§ 8301 et seq.) of Title 15, Commerce and Trade, and enacted, amended, and repealed numerous other sections and notes in the Code. For complete classification of this Act to the Code, see Short Title note set out under section 5301 of this title and Tables. § 5324. Registration of nonbank financial compa- nies supervised by the Board of Governors Not later than 180 days after the date of a final Council determination under section 5323 of this title that a nonbank financial company is to be supervised by the Board of Governors, such com- pany shall register with the Board of Governors, on forms prescribed by the Board of Governors, which shall include such information as the Board of Governors, in consultation with the Council, may deem necessary or appropriate to carry out this subchapter. (Pub. L. 111–203, title I, § 114, July 21, 2010, 124 Stat. 1403.) Editorial Notes REFERENCES IN TEXT This subchapter, referred to in text, was in the origi- nal ‘‘this title’’, meaning title I of Pub. L. 111–203, July 21, 2010, 124 Stat. 1391, which is classified principally to this subchapter. For complete classification of title I to the Code, see Short Title note set out under section 5301 of this title and Tables. § 5325. Enhanced supervision and prudential standards for nonbank financial companies supervised by the Board of Governors and certain bank holding companies (a) In general (1) Purpose In order to prevent or mitigate risks to the financial stability of the United States that could arise from the material financial dis- tress, failure, or ongoing activities of large, interconnected financial institutions, the Council may make recommendations to the Board of Governors concerning the establish- ment and refinement of prudential standards and reporting and disclosure requirements ap- plicable to nonbank financial companies su- pervised by the Board of Governors and large, interconnected bank holding companies, that— (A) are more stringent than those applica- ble to other nonbank financial companies and bank holding companies that do not present similar risks to the financial sta- bility of the United States; and (B) increase in stringency, based on the considerations identified in subsection (b)(3). (2) Recommended application of required standards In making recommendations under this sec- tion, the Council may— (A) differentiate among companies that are subject to heightened standards on an in- dividual basis or by category, taking into consideration their capital structure, riski- ness, complexity, financial activities (in- cluding the financial activities of their sub- sidiaries), size, and any other risk-related factors that the Council deems appropriate; or (B) recommend an asset threshold that is higher than the applicable threshold for the application of any standard described in sub- sections (c) through (g). (b) Development of prudential standards (1) In general The recommendations of the Council under subsection (a) may include— (A) risk-based capital requirements; (B) leverage limits; (C) liquidity requirements; (D) resolution plan and credit exposure re- port requirements; (E) concentration limits; (F) a contingent capital requirement; (G) enhanced public disclosures; (H) short-term debt limits; and (I) overall risk management requirements. (2) Prudential standards for foreign financial companies In making recommendations concerning the standards set forth in paragraph (1) that would apply to foreign nonbank financial companies supervised by the Board of Governors or for- eign-based bank holding companies, the Coun- cil shall— (A) give due regard to the principle of na- tional treatment and equality of competi- tive opportunity; and (B) take into account the extent to which the foreign nonbank financial company or foreign-based bank holding company is sub- ject on a consolidated basis to home country standards that are comparable to those ap- plied to financial companies in the United States. (3) Considerations In making recommendations concerning pru- dential standards under paragraph (1), the Council shall— (A) take into account differences among nonbank financial companies supervised by the Board of Governors and bank holding companies described in subsection (a), based on— (i) the factors described in subsections (a) and (b) of section 5323 of this title; (ii) whether the company owns an in- sured depository institution; (iii) nonfinancial activities and affili- ations of the company; and (iv) any other factors that the Council determines appropriate; (B) to the extent possible, ensure that small changes in the factors listed in sub- sections (a) and (b) of section 5323 of this title would not result in sharp, discontin- uous changes in the prudential standards es- tablished under section 5365 of this title; and (C) adapt its recommendations as appro- priate in light of any predominant line of Page 1843 TITLE 12—BANKS AND BANKING § 5325 business of such company, including assets under management or other activities for which particular standards may not be ap- propriate. (c) Contingent capital (1) Study required The Council shall conduct a study of the fea- sibility, benefits, costs, and structure of a con- tingent capital requirement for nonbank fi- nancial companies supervised by the Board of Governors and bank holding companies de- scribed in subsection (a), which study shall in- clude— (A) an evaluation of the degree to which such requirement would enhance the safety and soundness of companies subject to the requirement, promote the financial stability of the United States, and reduce risks to United States taxpayers; (B) an evaluation of the characteristics and amounts of contingent capital that should be required; (C) an analysis of potential prudential standards that should be used to determine whether the contingent capital of a company would be converted to equity in times of fi- nancial stress; (D) an evaluation of the costs to compa- nies, the effects on the structure and oper- ation of credit and other financial markets, and other economic effects of requiring con- tingent capital; (E) an evaluation of the effects of such re- quirement on the international competitive- ness of companies subject to the require- ment and the prospects for international co- ordination in establishing such requirement; and (F) recommendations for implementing regulations. (2) Report The Council shall submit a report to Con- gress regarding the study required by para- graph (1) not later than 2 years after July 21, 2010. (3) Recommendations (A) In general Subsequent to submitting a report to Con- gress under paragraph (2), the Council may make recommendations to the Board of Gov- ernors to require any nonbank financial company supervised by the Board of Gov- ernors and any bank holding company de- scribed in subsection (a) to maintain a min- imum amount of contingent capital that is convertible to equity in times of financial stress. (B) Factors to consider In making recommendations under this subsection, the Council shall consider— (i) an appropriate transition period for implementation of a conversion under this subsection; (ii) the factors described in subsection (b)(3); (iii) capital requirements applicable to a nonbank financial company supervised by the Board of Governors or a bank holding company described in subsection (a), and subsidiaries thereof; (iv) results of the study required by para- graph (1); and (v) any other factor that the Council deems appropriate. (d) Resolution plan and credit exposure reports (1) Resolution plan The Council may make recommendations to the Board of Governors concerning the re- quirement that each nonbank financial com- pany supervised by the Board of Governors and each bank holding company described in sub- section (a) report periodically to the Council, the Board of Governors, and the Corporation, the plan of such company for rapid and orderly resolution in the event of material financial distress or failure. (2) Credit exposure report The Council may make recommendations to the Board of Governors concerning the advis- ability of requiring each nonbank financial company supervised by the Board of Governors and bank holding company described in sub- section (a) to report periodically to the Coun- cil, the Board of Governors, and the Corpora- tion on— (A) the nature and extent to which the company has credit exposure to other sig- nificant nonbank financial companies and significant bank holding companies; and (B) the nature and extent to which other such significant nonbank financial compa- nies and significant bank holding companies have credit exposure to that company. (e) Concentration limits In order to limit the risks that the failure of any individual company could pose to nonbank financial companies supervised by the Board of Governors or bank holding companies described in subsection (a), the Council may make rec- ommendations to the Board of Governors to pre- scribe standards to limit such risks, as set forth in section 5365 of this title. (f) Enhanced public disclosures The Council may make recommendations to the Board of Governors to require periodic pub- lic disclosures by bank holding companies de- scribed in subsection (a) and by nonbank finan- cial companies supervised by the Board of Gov- ernors, in order to support market evaluation of the risk profile, capital adequacy, and risk man- agement capabilities thereof. (g) Short-term debt limits The Council may make recommendations to the Board of Governors to require short-term debt limits to mitigate the risks that an over- accumulation of such debt could pose to bank holding companies described in subsection (a), nonbank financial companies supervised by the Board of Governors, or the financial system. (Pub. L. 111–203, title I, § 115, July 21, 2010, 124 Stat. 1403; Pub. L. 115–174, title IV, § 401(c)(1)(A), May 24, 2018, 132 Stat. 1358.) Editorial Notes AMENDMENTS 2018—Subsec. (a)(2)(B). Pub. L. 115–174 substituted ‘‘the applicable threshold’’ for ‘‘$50,000,000,000’’. Page 1844 TITLE 12—BANKS AND BANKING § 5326 Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2018 AMENDMENT Except as otherwise provided, amendment by Pub. L. 115–174 effective 18 months after May 24, 2018, see sec- tion 401(d) of Pub. L. 115–174, set out as a note under section 5365 of this title. CONSTRUCTION OF 2018 AMENDMENT For construction of amendment by Pub. L. 115–174 as applied to certain foreign banking organizations, see section 401(g) of Pub. L. 115–174, set out as a note under section 5365 of this title. § 5326. Reports (a) In general Subject to subsection (b), the Council, acting through the Office of Financial Research, may require a bank holding company with total con- solidated assets of $250,000,000,000 or greater or a nonbank financial company supervised by the Board of Governors, and any subsidiary thereof, to submit certified reports to keep the Council informed as to— (1) the financial condition of the company; (2) systems for monitoring and controlling financial, operating, and other risks; (3) transactions with any subsidiary that is a depository institution; and (4) the extent to which the activities and op- erations of the company and any subsidiary thereof, could, under adverse circumstances, have the potential to disrupt financial mar- kets or affect the overall financial stability of the United States. (b) Use of existing reports (1) In general For purposes of compliance with subsection (a), the Council, acting through the Office of Financial Research, shall, to the fullest extent possible, use— (A) reports that a bank holding company, nonbank financial company supervised by the Board of Governors, or any functionally regulated subsidiary of such company has been required to provide to other Federal or State regulatory agencies or to a relevant foreign supervisory authority; (B) information that is otherwise required to be reported publicly; and (C) externally audited financial state- ments. (2) Availability Each bank holding company described in subsection (a) and nonbank financial company supervised by the Board of Governors, and any subsidiary thereof, shall provide to the Coun- cil, at the request of the Council, copies of all reports referred to in paragraph (1). (3) Confidentiality The Council shall maintain the confiden- tiality of the reports obtained under sub- section (a) and paragraph (1)(A) of this sub- section. (Pub. L. 111–203, title I, § 116, July 21, 2010, 124 Stat. 1406; Pub. L. 115–174, title IV, § 401(c)(1)(B), May 24, 2018, 132 Stat. 1358.) Editorial Notes AMENDMENTS 2018—Subsec. (a). Pub. L. 115–174 substituted ‘‘$250,000,000,000’’ for ‘‘$50,000,000,000’’ in introductory provisions. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2018 AMENDMENT Except as otherwise provided, amendment by Pub. L. 115–174 effective 18 months after May 24, 2018, see sec- tion 401(d) of Pub. L. 115–174, set out as a note under section 5365 of this title. CONSTRUCTION OF 2018 AMENDMENT For construction of amendment by Pub. L. 115–174 as applied to certain foreign banking organizations, see section 401(g) of Pub. L. 115–174, set out as a note under section 5365 of this title. § 5327. Treatment of certain companies that cease to be bank holding companies (a) Applicability This section shall apply to— (1) any entity that— (A) was a bank holding company having total consolidated assets equal to or greater than $50,000,000,000 as of January 1, 2010; and (B) received financial assistance under or participated in the Capital Purchase Pro- gram established under the Troubled Asset Relief Program authorized by the Emer- gency Economic Stabilization Act of 2008 [12 U.S.C. 5201 et seq.]; and (2) any successor entity (as defined by the Board of Governors, in consultation with the Council) to an entity described in paragraph (1). (b) Treatment If an entity described in subsection (a) ceases to be a bank holding company at any time after January 1, 2010, then such entity shall be treat- ed as a nonbank financial company supervised by the Board of Governors, as if the Council had made a determination under section 5323 of this title with respect to that entity. (c) Appeal (1) Request for hearing An entity may request, in writing, an oppor- tunity for a written or oral hearing before the Council to appeal its treatment as a nonbank financial company supervised by the Board of Governors in accordance with this section. Upon receipt of the request, the Council shall fix a time (not later than 30 days after the date of receipt of the request) and place at which such entity may appear, personally or through counsel, to submit written materials (or, at the sole discretion of the Council, oral testimony and oral argument). (2) Decision (A) Proposed decision A Council decision to grant an appeal under this subsection shall be made by a vote of not fewer than 2⁄3 of the voting mem- bers then serving, including an affirmative vote by the Chairperson. Not later than 60 days after the date of a hearing under para-