12 U.S.C. § 5365 — Enhanced supervision and prudential

Page 1857 TITLE 12—BANKS AND BANKING § 5365 10, 1978, 92 Stat. 3672, which is classified principally to chapter 33 (§ 3201 et seq.) of this title. For complete classification of this Act to the Code, see Short Title note set out under section 3201 of this title and Tables. AMENDMENTS 2018—Pub. L. 115–174 substituted ‘‘$250,000,000,000’’ for ‘‘$50,000,000,000’’. 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. § 5365. 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 or failure, or ongoing activities, of large, interconnected financial institutions, the Board of Governors shall, on its own or pursu- ant to recommendations by the Council under section 5325 of this title, establish prudential standards for nonbank financial companies su- pervised by the Board of Governors and bank holding companies with total consolidated as- sets equal to or greater than $250,000,000,000 that— (A) are more stringent than the standards and requirements applicable to nonbank fi- nancial companies and bank holding compa- nies that do not present similar risks to the financial stability of the United States; and (B) increase in stringency, based on the considerations identified in subsection (b)(3). (2) Tailored application (A) In general In prescribing more stringent prudential standards under this section, the Board of Governors shall, on its own or pursuant to a recommendation by the Council in accord- ance with section 5325 of this title, differen- tiate among companies on an individual basis or by category, taking into consider- ation their capital structure, riskiness, com- plexity, financial activities (including the fi- nancial activities of their subsidiaries), size, and any other risk-related factors that the Board of Governors deems appropriate. (B) Adjustment of threshold for application of certain standards The Board of Governors may, pursuant to a recommendation by the Council in accord- ance with section 5325 of this title, establish an asset threshold above the applicable threshold for the application of any standard established under subsections (c) through (g). (C) Risks to financial stability and safety and soundness The Board of Governors may by order or rule promulgated pursuant to section 553 of title 5 apply any prudential standard estab- lished under this section to any bank hold- ing company or bank holding companies with total consolidated assets equal to or greater than $100,000,000,000 to which the prudential standard does not otherwise apply provided that the Board of Gov- ernors— (i) determines that application of the prudential standard is appropriate— (I) to prevent or mitigate risks to the financial stability of the United States, as described in paragraph (1); or (II) to promote the safety and sound- ness of the bank holding company or bank holding companies; and (ii) takes into consideration the bank holding company’s or bank holding compa- nies’ capital structure, riskiness, com- plexity, financial activities (including fi- nancial activities of subsidiaries), size, and any other risk-related factors that the Board of Governors deems appropriate. (b) Development of prudential standards (1) In general (A) Required standards The Board of Governors shall establish prudential standards for nonbank financial companies supervised by the Board of Gov- ernors and bank holding companies de- scribed in subsection (a), that shall include— (i) risk-based capital requirements and leverage limits, unless the Board of Gov- ernors, in consultation with the Council, determines that such requirements are not appropriate for a company subject to more stringent prudential standards because of the activities of such company (such as in- vestment company activities or assets under management) or structure, in which case, the Board of Governors shall apply other standards that result in similarly stringent risk controls; (ii) liquidity requirements; (iii) overall risk management require- ments; (iv) resolution plan requirements; and (v) concentration limits. (B) Additional standards authorized The Board of Governors may establish ad- ditional prudential standards for nonbank fi- nancial companies supervised by the Board of Governors and bank holding companies described in subsection (a), that include— (i) a contingent capital requirement; (ii) enhanced public disclosures, includ- ing credit exposure reports; (iii) short-term debt limits; and (iv) such other prudential standards as the Board or Governors, on its own or pur- suant to a recommendation made by the Council in accordance with section 5325 of this title, determines are appropriate. Page 1858 TITLE 12—BANKS AND BANKING § 5365 (2) Standards for foreign financial companies In applying the standards set forth in para- graph (1) to any foreign nonbank financial company supervised by the Board of Governors or foreign-based bank holding company, the Board of Governors 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 financial company is subject on a consolidated basis to home country stand- ards that are comparable to those applied to financial companies in the United States. (3) Considerations In prescribing prudential standards under paragraph (1), the Board of Governors 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 risk-related factors that the Board of Governors determines appro- priate; (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 paragraph (1) of this sub- section; (C) take into account any recommenda- tions of the Council under section 5325 of this title; and (D) adapt the required standards as appro- priate in light of any predominant line of business of such company, including assets under management or other activities for which particular standards may not be ap- propriate. (4) Consultation Before imposing prudential standards or any other requirements pursuant to this section, including notices of deficiencies in resolution plans and more stringent requirements or di- vestiture orders resulting from such notices, that are likely to have a significant impact on a functionally regulated subsidiary or deposi- tory institution subsidiary of a nonbank finan- cial company supervised by the Board of Gov- ernors or a bank holding company described in subsection (a), the Board of Governors shall consult with each Council member that pri- marily supervises any such subsidiary with re- spect to any such standard or requirement. (5) Report The Board of Governors shall submit an an- nual report to Congress regarding the imple- mentation of the prudential standards re- quired pursuant to paragraph (1), including the use of such standards to mitigate risks to the financial stability of the United States. (c) Contingent capital (1) In general Subsequent to submission by the Council of a report to Congress under section 5325(c) of this title, the Board of Governors may issue regulations that require each nonbank finan- cial company supervised by the Board of Gov- ernors and bank holding companies described in subsection (a) to maintain a minimum amount of contingent capital that is convert- ible to equity in times of financial stress. (2) Factors to consider In issuing regulations under this subsection, the Board of Governors shall consider— (A) the results of the study undertaken by the Council, and any recommendations of the Council, under section 5325(c) of this title; (B) an appropriate transition period for implementation of contingent capital under this subsection; (C) the factors described in subsection (b)(3)(A); (D) capital requirements applicable to the nonbank financial company supervised by the Board of Governors or a bank holding company described in subsection (a), and subsidiaries thereof; and (E) any other factor that the Board of Gov- ernors deems appropriate. (d) Resolution plan and credit exposure reports (1) Resolution plan The Board of Governors shall require each nonbank financial company supervised by the Board of Governors and bank holding compa- nies described in subsection (a) to report peri- odically to the Board of Governors, the Coun- cil, and the Corporation the plan of such com- pany for rapid and orderly resolution in the event of material financial distress or failure, which shall include— (A) information regarding the manner and extent to which any insured depository in- stitution affiliated with the company is ade- quately protected from risks arising from the activities of any nonbank subsidiaries of the company; (B) full descriptions of the ownership structure, assets, liabilities, and contractual obligations of the company; (C) identification of the cross-guarantees tied to different securities, identification of major counterparties, and a process for de- termining to whom the collateral of the company is pledged; and (D) any other information that the Board of Governors and the Corporation jointly re- quire by rule or order. (2) Credit exposure report The Board of Governors may require each nonbank financial company supervised by the Board of Governors and bank holding compa- nies described in subsection (a) to report peri- odically to the Board of Governors, the Coun- cil, and the Corporation 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 Page 1859 TITLE 12—BANKS AND BANKING § 5365 (B) the nature and extent to which other significant nonbank financial companies and significant bank holding companies have credit exposure to that company. (3) Review The Board of Governors and the Corporation shall review the information provided in ac- cordance with this subsection by each nonbank financial company supervised by the Board of Governors and bank holding company described in subsection (a). (4) Notice of deficiencies If the Board of Governors and the Corpora- tion jointly determine, based on their review under paragraph (3), that the resolution plan of a nonbank financial company supervised by the Board of Governors or a bank holding com- pany described in subsection (a) is not credible or would not facilitate an orderly resolution of the company under title 11— (A) the Board of Governors and the Cor- poration shall notify the company of the de- ficiencies in the resolution plan; and (B) the company shall resubmit the resolu- tion plan within a timeframe determined by the Board of Governors and the Corporation, with revisions demonstrating that the plan is credible and would result in an orderly resolution under title 11, including any pro- posed changes in business operations and corporate structure to facilitate implemen- tation of the plan. (5) Failure to resubmit credible plan (A) In general If a nonbank financial company supervised by the Board of Governors or a bank holding company described in subsection (a) fails to timely resubmit the resolution plan as re- quired under paragraph (4), with such revi- sions as are required under subparagraph (B), the Board of Governors and the Corpora- tion may jointly impose more stringent cap- ital, leverage, or liquidity requirements, or restrictions on the growth, activities, or op- erations of the company, or any subsidiary thereof, until such time as the company re- submits a plan that remedies the defi- ciencies. (B) Divestiture The Board of Governors and the Corpora- tion, in consultation with the Council, may jointly direct a nonbank financial company supervised by the Board of Governors or a bank holding company described in sub- section (a), by order, to divest certain assets or operations identified by the Board of Gov- ernors and the Corporation, to facilitate an orderly resolution of such company under title 11, in the event of the failure of such company, in any case in which— (i) the Board of Governors and the Cor- poration have jointly imposed more strin- gent requirements on the company pursu- ant to subparagraph (A); and (ii) the company has failed, within the 2- year period beginning on the date of the imposition of such requirements under subparagraph (A), to resubmit the resolu- tion plan with such revisions as were re- quired under paragraph (4)(B). (6) No limiting effect A resolution plan submitted in accordance with this subsection shall not be binding on a bankruptcy court, a receiver appointed under subchapter II, or any other authority that is authorized or required to resolve the nonbank financial company supervised by the Board, any bank holding company, or any subsidiary or affiliate of the foregoing. (7) No private right of action No private right of action may be based on any resolution plan submitted in accordance with this subsection. (8) Rules Not later than 18 months after July 21, 2010, the Board of Governors and the Corporation shall jointly issue final rules implementing this subsection. (e) Concentration limits (1) Standards In order to limit the risks that the failure of any individual company could pose to a nonbank financial company supervised by the Board of Governors or a bank holding com- pany described in subsection (a), the Board of Governors, by regulation, shall prescribe standards that limit such risks. (2) Limitation on credit exposure The regulations prescribed by the Board of Governors under paragraph (1) shall prohibit each nonbank financial company supervised by the Board of Governors and bank holding company described in subsection (a) from hav- ing credit exposure to any unaffiliated com- pany that exceeds 25 percent of the capital stock and surplus (or such lower amount as the Board of Governors may determine by reg- ulation to be necessary to mitigate risks to the financial stability of the United States) of the company. (3) Credit exposure For purposes of paragraph (2), ‘‘credit expo- sure’’ to a company means— (A) all extensions of credit to the com- pany, including loans, deposits, and lines of credit; (B) all repurchase agreements and reverse repurchase agreements with the company, and all securities borrowing and lending transactions with the company, to the ex- tent that such transactions create credit ex- posure for the nonbank financial company supervised by the Board of Governors or a bank holding company described in sub- section (a); (C) all guarantees, acceptances, or letters of credit (including endorsement or standby letters of credit) issued on behalf of the com- pany; (D) all purchases of or investment in secu- rities issued by the company; (E) counterparty credit exposure to the company in connection with a derivative transaction between the nonbank financial company supervised by the Board of Gov- Page 1860 TITLE 12—BANKS AND BANKING § 5365 ernors or a bank holding company described in subsection (a) and the company; and (F) any other similar transactions that the Board of Governors, by regulation, deter- mines to be a credit exposure for purposes of this section. (4) Attribution rule For purposes of this subsection, any trans- action by a nonbank financial company super- vised by the Board of Governors or a bank holding company described in subsection (a) with any person is a transaction with a com- pany, to the extent that the proceeds of the transaction are used for the benefit of, or transferred to, that company. (5) Rulemaking The Board of Governors may issue such reg- ulations and orders, including definitions con- sistent with this section, as may be necessary to administer and carry out this subsection. (6) Exemptions This subsection shall not apply to any Fed- eral home loan bank. The Board of Governors may, by regulation or order, exempt trans- actions, in whole or in part, from the defini- tion of the term ‘‘credit exposure’’ for pur- poses of this subsection, if the Board of Gov- ernors finds that the exemption is in the pub- lic interest and is consistent with the purpose of this subsection. (7) Transition period (A) In general This subsection and any regulations and orders of the Board of Governors under this subsection shall not be effective until 3 years after July 21, 2010. (B) Extension authorized The Board of Governors may extend the period specified in subparagraph (A) for not longer than an additional 2 years. (f) Enhanced public disclosures The Board of Governors may prescribe, by reg- ulation, periodic public disclosures by nonbank financial companies supervised by the Board of Governors and bank holding companies de- scribed in subsection (a) in order to support market evaluation of the risk profile, capital adequacy, and risk management capabilities thereof. (g) Short-term debt limits (1) In general In order to mitigate the risks that an over- accumulation of short-term debt could pose to financial companies and to the stability of the United States financial system, the Board of Governors may, by regulation, prescribe a limit on the amount of short-term debt, in- cluding off-balance sheet exposures, that may be accumulated by any bank holding company described in subsection (a) and any nonbank financial company supervised by the Board of Governors. (2) Basis of limit Any limit prescribed under paragraph (1) shall be based on the short-term debt of the company described in paragraph (1) as a per- centage of capital stock and surplus of the company or on such other measure as the Board of Governors considers appropriate. (3) Short-term debt defined For purposes of this subsection, the term ‘‘short-term debt’’ means such liabilities with short-dated maturity that the Board of Gov- ernors identifies, by regulation, except that such term does not include insured deposits. (4) Rulemaking authority In addition to prescribing regulations under paragraphs (1) and (3), the Board of Governors may prescribe such regulations, including defi- nitions consistent with this subsection, and issue such orders, as may be necessary to carry out this subsection. (5) Authority to issue exemptions and adjust- ments Notwithstanding the Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.), the Board of Governors may, if it determines such action is necessary to ensure appropriate heightened prudential supervision, with respect to a com- pany described in paragraph (1) that does not control an insured depository institution, issue to such company an exemption from or adjustment to the limit prescribed under para- graph (1). (h) Risk committee (1) Nonbank financial companies supervised by the Board of Governors The Board of Governors shall require each nonbank financial company supervised by the Board of Governors that is a publicly traded company to establish a risk committee, as set forth in paragraph (3), not later than 1 year after the date of receipt of a notice of final de- termination under section 5323(e)(3) of this title with respect to such nonbank financial company supervised by the Board of Gov- ernors. (2) Certain bank holding companies (A) Mandatory regulations The Board of Governors shall issue regula- tions requiring each bank holding company that is a publicly traded company and that has total consolidated assets of not less than $50,000,000,000 to establish a risk committee, as set forth in paragraph (3). (B) Permissive regulations The Board of Governors may require each bank holding company that is a publicly traded company and that has total consoli- dated assets of less than $50,000,000,000 to es- tablish a risk committee, as set forth in paragraph (3), as determined necessary or appropriate by the Board of Governors to promote sound risk management practices. (3) Risk committee A risk committee required by this sub- section shall— (A) be responsible for the oversight of the enterprise-wide risk management practices of the nonbank financial company super- vised by the Board of Governors or bank Page 1861 TITLE 12—BANKS AND BANKING § 5365 holding company described in subsection (a), as applicable; (B) include such number of independent di- rectors as the Board of Governors may deter- mine appropriate, based on the nature of op- erations, size of assets, and other appro- priate criteria related to the nonbank finan- cial company supervised by the Board of Governors or a bank holding company de- scribed in subsection (a), as applicable; and (C) include at least 1 risk management ex- pert having experience in identifying, assess- ing, and managing risk exposures of large, complex firms. (4) Rulemaking The Board of Governors shall issue final rules to carry out this subsection, not later than 1 year after the transfer date, to take ef- fect not later than 15 months after the trans- fer date. (i) Stress tests (1) By the Board of Governors (A) Annual tests required The Board of Governors, in coordination with the appropriate primary financial regu- latory agencies and the Federal Insurance Office, shall conduct annual analyses in which nonbank financial companies super- vised by the Board of Governors and bank holding companies described in subsection (a) are subject to evaluation of whether such companies have the capital, on a total con- solidated basis, necessary to absorb losses as a result of adverse economic conditions. (B) Test parameters and consequences The Board of Governors— (i) shall provide for at least 2 different sets of conditions under which the evalua- tion required by this subsection shall be conducted, including baseline and severely adverse; (ii) may require the tests described in subparagraph (A) at bank holding compa- nies and nonbank financial companies, in addition to those for which annual tests are required under subparagraph (A); (iii) may develop and apply such other analytic techniques as are necessary to identify, measure, and monitor risks to the financial stability of the United States; (iv) shall require the companies de- scribed in subparagraph (A) to update their resolution plans required under subsection (d)(1), as the Board of Governors deter- mines appropriate, based on the results of the analyses; and (v) shall publish a summary of the re- sults of the tests required under subpara- graph (A) or clause (ii) of this subpara- graph. (2) By the company (A) Requirement A nonbank financial company supervised by the Board of Governors and a bank hold- ing company described in subsection (a) shall conduct periodic stress tests. All other financial companies that have total consoli- dated assets of more than $250,000,000,000 and are regulated by a primary Federal financial regulatory agency shall conduct periodic stress tests. The tests required under this subparagraph shall be conducted in accord- ance with the regulations prescribed under subparagraph (C). (B) Report A company required to conduct stress tests under subparagraph (A) shall submit a report to the Board of Governors and to its primary financial regulatory agency at such time, in such form, and containing such in- formation as the primary financial regu- latory agency shall require. (C) Regulations Each Federal primary financial regulatory agency, in coordination with the Board of Governors and the Federal Insurance Office, shall issue consistent and comparable regu- lations to implement this paragraph that shall— (i) define the term ‘‘stress test’’ for pur- poses of this paragraph; (ii) establish methodologies for the con- duct of stress tests required by this para- graph that shall provide for at least 2 dif- ferent sets of conditions, including base- line and severely adverse; (iii) establish the form and content of the report required by subparagraph (B); and (iv) require companies subject to this paragraph to publish a summary of the re- sults of the required stress tests. (j) Leverage limitation (1) Requirement The Board of Governors shall require a bank holding company with total consolidated as- sets equal to or greater than $250,000,000,000 or a nonbank financial company supervised by the Board of Governors to maintain a debt to equity ratio of no more than 15 to 1, upon a de- termination by the Council that such company poses a grave threat to the financial stability of the United States and that the imposition of such requirement is necessary to mitigate the risk that such company poses to the finan- cial stability of the United States. Nothing in this paragraph shall apply to a Federal home loan bank. (2) Considerations In making a determination under this sub- section, the Council shall consider the factors described in subsections (a) and (b) of section 5323 of this title and any other risk-related factors that the Council deems appropriate. (3) Regulations The Board of Governors shall promulgate regulations to establish procedures and timelines for complying with the requirements of this subsection. (k) Inclusion of off-balance-sheet activities in computing capital requirements (1) In general In the case of any bank holding company de- scribed in subsection (a) or nonbank financial Page 1862 TITLE 12—BANKS AND BANKING § 5365 company supervised by the Board of Gov- ernors, the computation of capital for pur- poses of meeting capital requirements shall take into account any off-balance-sheet activi- ties of the company. (2) Exemptions If the Board of Governors determines that an exemption from the requirement under para- graph (1) is appropriate, the Board of Gov- ernors may exempt a company, or any trans- action or transactions engaged in by such company, from the requirements of paragraph (1). (3) Off-balance-sheet activities defined For purposes of this subsection, the term ‘‘off-balance-sheet activities’’ means an exist- ing liability of a company that is not cur- rently a balance sheet liability, but may be- come one upon the happening of some future event, including the following transactions, to the extent that they may create a liability: (A) Direct credit substitutes in which a bank substitutes its own credit for a third party, including standby letters of credit. (B) Irrevocable letters of credit that guar- antee repayment of commercial paper or tax-exempt securities. (C) Risk participations in bankers’ accept- ances. (D) Sale and repurchase agreements. (E) Asset sales with recourse against the seller. (F) Interest rate swaps. (G) Credit swaps. (H) Commodities contracts. (I) Forward contracts. (J) Securities contracts. (K) Such other activities or transactions as the Board of Governors may, by rule, de- fine. (Pub. L. 111–203, title I, § 165, July 21, 2010, 124 Stat. 1423; Pub. L. 115–174, title IV, § 401(a), May 24, 2018, 132 Stat. 1356.) Editorial Notes REFERENCES IN TEXT Subchapter II, referred to in subsec. (d)(6), was in the original ‘‘title II’’, meaning title II of Pub. L. 111–203, July 21, 2010, 124 Stat. 1442, which is classified prin- cipally to subchapter II (§ 5381 et seq.) of this chapter. For complete classification of title II to the Code, see Tables. The Bank Holding Company Act of 1956, referred to in subsec. (g)(5), is act May 9, 1956, ch. 240, 70 Stat. 133, which is classified principally to chapter 17 (§ 1841 et seq.) of this title. For complete classification of this Act to the Code, see Short Title note set out under sec- tion 1841 of this title and Tables. AMENDMENTS 2018—Subsec. (a)(1). Pub. L. 115–174, § 401(a)(1)(A), sub- stituted ‘‘$250,000,000,000’’ for ‘‘$50,000,000,000’’ in intro- ductory provisions. Subsec. (a)(2)(A). Pub. L. 115–174, § 401(a)(1)(B)(i), sub- stituted ‘‘the Board of Governors shall’’ for ‘‘the Board of Governors may’’. Subsec. (a)(2)(B). Pub. L. 115–174, § 401(a)(1)(B)(ii), sub- stituted ‘‘the applicable threshold’’ for ‘‘$50,000,000,000’’. Subsec. (a)(2)(C). Pub. L. 115–174, § 401(a)(1)(B)(iii), added subpar. (C). Subsec. (b)(1)(A)(iv). Pub. L. 115–174, § 401(a)(2)(A), struck out ‘‘and credit exposure report’’ after ‘‘resolu- tion plan’’. Subsec. (b)(1)(B)(ii). Pub. L. 115–174, § 401(a)(2)(B), in- serted ‘‘, including credit exposure reports’’ before semicolon at end. Subsec. (d)(2). Pub. L. 115–174, § 401(a)(3), substituted ‘‘The Board of Governors may’’ for ‘‘The Board of Gov- ernors shall’’ in introductory provisions. Subsec. (h)(2). Pub. L. 115–174, § 401(a)(4), substituted ‘‘$50,000,000,000’’ for ‘‘$10,000,000,000’’ in two places. Subsec. (i)(1)(B)(i). Pub. L. 115–174, § 401(a)(5)(A), sub- stituted ‘‘2 different sets’’ for ‘‘3 different sets’’ and struck out ‘‘, adverse,’’ after ‘‘baseline’’. Subsec. (i)(2)(A). Pub. L. 115–174, § 401(a)(5)(B)(i), in first sentence, substituted ‘‘periodic’’ for ‘‘semiannual’’ and, in second sentence, substituted ‘‘$250,000,000,000’’ for ‘‘$10,000,000,000’’ and ‘‘periodic’’ for ‘‘annual’’. Subsec. (i)(2)(C)(ii). Pub. L. 115–174, § 401(a)(5)(B)(ii), substituted ‘‘2 different sets’’ for ‘‘3 different sets’’ and struck out ‘‘, adverse,’’ after ‘‘baseline’’. Subsec. (j)(1). Pub. L. 115–174, § 401(a)(6), substituted ‘‘$250,000,000,000’’ for ‘‘$50,000,000,000’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2018 AMENDMENT Pub. L. 115–174, title IV, § 401(d), May 24, 2018, 132 Stat. 1358, provided that: ‘‘(1) IN GENERAL.—Except as provided in paragraph (2), the amendments made by this section [amending this section and sections 248, 5325, 5326, 5331, 5345, 5363, and 5364 of this title] shall take effect on the date that is 18 months after the date of enactment of this Act [May 24, 2018]. ‘‘(2) EXCEPTION.—Notwithstanding paragraph (1), the amendments made by this section shall take effect on the date of enactment of this Act with respect to any bank holding company with total consolidated assets of less than $100,000,000,000. ‘‘(3) ADDITIONAL AUTHORITY.—Before the effective date described in paragraph (1), the Board of Governors of the Federal Reserve System may by order exempt any bank holding company with total consolidated assets of less than $250,000,000,000 from any prudential standard under section 165 of the Financial Stability Act of 2010 (12 U.S.C. 5365). ‘‘(4) RULE OF CONSTRUCTION.—Nothing in this section [amending this section and sections 248, 5325, 5326, 5331, 5345, 5363, and 5364 of this title and enacting provisions set out as notes under this section] shall be construed to prohibit the Board of Governors of the Federal Re- serve System from issuing an order or rule making under section 165(a)(2)(C) of the Financial Stability Act of 2010 (12 U.S.C. 5365(a)(2)(C)), as added by this section, before the effective date described in paragraph (1).’’ [For definition of ‘‘bank holding company’’ as used in section 401(d) of Pub. L. 115–174, set out above, see sec- tion 2 of Pub. L. 115–174, set out as a Definitions note below.] CONSTRUCTION OF 2018 AMENDMENT Pub. L. 115–174, title IV, § 401(b), May 24, 2018, 132 Stat. 1357, provided that: ‘‘Nothing in subsection (a) [amend- ing this section] shall be construed to limit— ‘‘(1) the authority of the Board of Governors of the Federal Reserve System, in prescribing prudential standards under section 165 of the Financial Stability Act of 2010 (12 U.S.C. 5365) or any other law, to tailor or differentiate among companies on an individual basis or by category, taking into consideration their capital structure, riskiness, complexity, financial ac- tivities (including financial activities of their sub- sidiaries), size, and any other risk-related factors that the Board of Governors deems appropriate; or ‘‘(2) the supervisory, regulatory, or enforcement au- thority of an appropriate Federal banking agency to further the safe and sound operation of an institution under the supervision of the appropriate Federal banking agency.’’ [For definitions of ‘‘appropriate Federal banking agency’’ and ‘‘companies’’ as used in section 401(b) of Page 1863 TITLE 12—BANKS AND BANKING § 5367 Pub. L. 115–174, set out above, see section 2 of Pub. L. 115–174, set out as a Definitions note below.] Pub. L. 115–174, title IV, § 401(g), May 24, 2018, 132 Stat. 1359, provided that: ‘‘Nothing in this section [amending this section and sections 248, 5325, 5326, 5331, 5345, 5363, and 5364 of this title and enacting provisions set out as notes under this section] shall be construed to— ‘‘(1) affect the legal effect of the final rule of the Board of Governors of the Federal Reserve System entitled ‘Enhanced Prudential Standards for Bank Holding Companies and Foreign Banking Organiza- tions’ (79 Fed. Reg. 17240 (March 27, 2014)) as applied to foreign banking organizations with total consoli- dated assets equal to or greater than $100,000,000,000; or ‘‘(2) limit the authority of the Board of Governors of the Federal Reserve System to require the estab- lishment of an intermediate holding company under, implement enhanced prudential standards with re- spect to, or tailor the regulation of a foreign banking organization with total consolidated assets equal to or greater than $100,000,000,000.’’ SUPERVISORY STRESS TEST Pub. L. 115–174, title IV, § 401(e), May 24, 2018, 132 Stat. 1359, provided that: ‘‘Beginning on the effective date de- scribed in subsection (d)(1) [of section 401 of Pub. L. 115–174, set out above], the Board of Governors of the Federal Reserve System shall, on a periodic basis, con- duct supervisory stress tests of bank holding companies with total consolidated assets equal to or greater than $100,000,000,000 and total consolidated assets of less than $250,000,000,000 to evaluate whether such bank holding companies have the capital, on a total consolidated basis, necessary to absorb losses as a result of adverse economic conditions.’’ [For definition of ‘‘bank holding companies’’ as used in section 401(e) of Pub. L. 115–174, set out above, see section 2 of Pub. L. 115–174, set out as a Definitions note below.] GLOBAL SYSTEMICALLY IMPORTANT BANK HOLDING COMPANIES Pub. L. 115–174, title IV, § 401(f), May 24, 2018, 132 Stat. 1359, provided that: ‘‘Any bank holding company, re- gardless of asset size, that has been identified as a glob- al systemically important BHC under section 217.402 of title 12, Code of Federal Regulations, shall be consid- ered a bank holding company with total consolidated assets equal to or greater than $250,000,000,000 with re- spect to the application of standards or requirements under— ‘‘(1) this section [amending this section and sec- tions 248, 5325, 5326, 5331, 5345, 5363, and 5364 of this title and enacting provisions set out as notes under this section]; ‘‘(2) sections 116(a), 121(a), 155(d), 163(b), 164, and 165 of the Financial Stability Act of 2010 (12 U.S.C. 5326(a), 5331(a), 5345(d), 5363(b), 5364, 5365); and ‘‘(3) paragraph (2)(A) of the second subsection (s) (relating to assessments) of section 11 of the Federal Reserve Act (12 U.S.C. 248(s)(2)[(A)]).’’ [For definition of ‘‘bank holding company’’ as used in section 401(f) of Pub. L. 115–174, set out above, see sec- tion 2 of Pub. L. 115–174, set out as a Definitions note below.] DEFINITIONS Pub. L. 115–174, § 2, May 24, 2018, 132 Stat. 1297, pro- vided that: ‘‘In this Act [see Short Title of 2018 Amend- ment note set out under section 1601 of Title 15, Com- merce and Trade]: ‘‘(1) APPROPRIATE FEDERAL BANKING AGENCY; COM- PANY; DEPOSITORY INSTITUTION; DEPOSITORY INSTITU- TION HOLDING COMPANY.—The terms ‘appropriate Fed- eral banking agency’, ‘company’, ‘depository institu- tion’, and ‘depository institution holding company’ have the meanings given those terms in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813). ‘‘(2) BANK HOLDING COMPANY.—The term ‘bank hold- ing company’ has the meaning given the term in sec- tion 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 1841).’’ § 5366. Early remediation requirements (a) In general The Board of Governors, in consultation with the Council and the Corporation, shall prescribe regulations establishing requirements to provide for the early remediation of financial distress of a nonbank financial company supervised by the Board of Governors or a bank holding company described in section 5365(a) of this title, except that nothing in this subsection authorizes the provision of financial assistance from the Fed- eral Government. (b) Purpose of the early remediation require- ments The purpose of the early remediation require- ments under subsection (a) shall be to establish a series of specific remedial actions to be taken by a nonbank financial company supervised by the Board of Governors or a bank holding com- pany described in section 5365(a) of this title that is experiencing increasing financial dis- tress, in order to minimize the probability that the company will become insolvent and the po- tential harm of such insolvency to the financial stability of the United States. (c) Remediation requirements The regulations prescribed by the Board of Governors under subsection (a) shall— (1) define measures of the financial condition of the company, including regulatory capital, liquidity measures, and other forward-looking indicators; and (2) establish requirements that increase in stringency as the financial condition of the company declines, including— (A) requirements in the initial stages of fi- nancial decline, including limits on capital distributions, acquisitions, and asset growth; and (B) requirements at later stages of finan- cial decline, including a capital restoration plan and capital-raising requirements, limits on transactions with affiliates, management changes, and asset sales. (Pub. L. 111–203, title I, § 166, July 21, 2010, 124 Stat. 1432.) § 5367. Affiliations (a) Affiliations Nothing in this part shall be construed to re- quire a nonbank financial company supervised by the Board of Governors, or a company that controls a nonbank financial company super- vised by the Board of Governors, to conform the activities thereof to the requirements of section 1843 of this title. (b) Requirement (1) In general (A) Board authority If a nonbank financial company supervised by the Board of Governors conducts activi- ties other than those that are determined to