,,ii #aacth ,,congress #ast ,session ,s4 #gih ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,april #bd1 #bjac ,mr4 ,brown 7for himself1 ,mr4 ,vitter1 ,mr4 ,kirk1 and ,mr4 ,sessions7 introduced the following bill2 which was read twice and referred to the ,committee on ,banking1 ,housing1 and ,urban ,affairs ,a ,,bill ,to address equity capital requirements for financial institutions1 bank holding companies1 subsidiaries1 and affiliates1 and for other purposes4 #a4 ,short title ,this ,act may be cited as the ,terminating ,bailouts for ,taxpayer ,fairness ,act of #bjac or the ,,tbtf ,act4 #b4 ,definitions 7a7 ,in general ,as used in this ,act-- 7#a7 the terms affiliate1 appropriate ,federal banking agency1 ,federal banking agency1 foreign bank1 and insured depository institution have the same meanings as in section #c of the ,federal ,deposit ,insurance ,act 7#ab ,u4,s4,c4 #ahac72 7#b7 the terms bank holding company and subsidiary have the same meanings as in section #b of the ,bank ,holding ,company ,act of #aief 7#ab ,u4,s4,c4 #ahda72 7#c7 the term ,board means the ,board of ,governors of the ,federal ,reserve ,system2 7#d7 the term ,corporation means the ,federal ,deposit ,insurance ,corporation2 7#e7 the term financial institution means an insured depository institution1 bank holding company1 a savings and loan holding company1 and a foreign bank subject to the ,bank ,holding ,company ,act of #aief2 7#f7 the term nonbank financial company has the same meaning as in the ,dodd-,frank ,wall ,street ,reform and ,consumer ,protection ,act 7#ab ,u4,s4,c4 #ecaa72 and 7#g7 the term savings and loan holding company has the same meaning as in section #aj of the ,home ,owners' ,loan ,act 7#aj ,u4,s4,c4 #adfg;a71 except that such term does not include any savings and loan holding company described in section #aj7;c77#i77;,c7 of the ,home ,owners' ,loan ,act 7#ab ,u4,s4,c4 #adfg;a7c77#i77;,c774 #c4 ,equity capital requirements 7a7 ,equity capital requirements for bank holding companies1 subsidiaries1 and affiliates 7#a7 ,equity capital requirements 7,a7 ,in general ,not later than #a year after the date of enactment of this ,act1 the appropriate ,federal banking agency1 in consultation with the other ,federal banking agencies1 shall1 by rule1 establish capital requirements for the ratio of equity capital to total consolidated assets for all financial institutions4 7,b7 ,limitations 7i7 ,in general ,in no case may the requirements issued under this subsection require any financial institution with more than #ej1jjj1jjj1jjj in total consolidated assets to have a ratio of less than #h percent of equity capital to total consolidated assets4 7ii7 ,comparability ,the equity capital requirement issued under this subsection for any financial institution with #ej1jjj1jjj1jjj or less in total consolidated assets shall be comparable to the requirements established by the appropriate ,federal banking agencies under the prompt corrective actions regulations implementing section #ch of the ,federal ,deposit ,insurance ,act 7#ab ,u4,s4,c4 #ahcao7 and under the capital adequacy regulations implementing section #e of the ,bank ,holding ,company ,act of #aief 7#ab ,u4,s4,c4 #ahdd71 that were in effect as of ,may #a1 #bjac4 7#b7 ,capital surcharge for the largest financial institutions 7,a7 ,study required 7i7 ,in general ,the ,corporation shall study historical equity capital ratios chosen by large depository institutions before the advent of the ,federal ,reserve ,system1 ,federal deposit insurance1 and the ,federal income tax encouraged depositories to favor more highly leveraged deposit and debt funding4 7ii7 ,report to ,congress ,not later than #ij days after the date of enactment of this ,act1 the ,corporation shall issue a report to the ,committee on ,banking1 ,housing1 and ,urban ,affairs of the ,senate and the ,committee on ,financial ,services of the ,house of ,representatives regarding the study conducted under clause 7i74 7iii7 ,incorporation of findings ,the ,corporation1 in consultation with the other ,federal banking agencies1 shall structure the capital surcharge for financial institutions with at least #ejj1jjj1jjj1jjj in total consolidated assets1 such that the surcharge fully accounts for and offsets any distortion of capital levels by the ,government policies described in clause 7i74 7,b7 ,rules ,not later than #a year after the date of completion of the study required by subparagraph 7,a71 the appropriate ,federal banking agency1 in consultation with the other ,federal banking agencies1 shall1 by rule1 establish equity capital surcharges for each financial institution having at least #ejj1jjj1jjj1jjj in total consolidated assets4 7,c7 ,increases authorized ,capital requirements established under this paragraph may increase continuously as a percentage of total consolidated assets as the total consolidated assets of a financial institution increase4 7,d7 ,required amount ,the surcharge imposed under the rules issued under this paragraph shall require any financial institution having at least #ejj1jjj1jjj1jjj in total consolidated assets to have a ratio of not less than #ae percent of equity capital to total consolidated assets4 7,e7 ,anti-evasion 7i7 ,in general ,any attempt by a financial institution to structure any activity1 transaction1 or affiliation for the purpose or effect of evading or attempting to evade the asset threshold that gives rise to the surcharge provided in subparagraph 7,a7 shall be considered a violation of the ,federal ,deposit ,insurance ,act1 section #bd of the ,revised ,statutes of the ,united ,states1 and the ,bank ,holding ,company ,act of #aief1 as applicable to such financial institution4 7ii7 ,restricting activities ,notwithstanding any other provision of law1 if the ,board1 the ,corporation1 or the ,comptroller of the ,currency has reasonable cause to believe that a financial institution or any affiliate thereof has engaged in an activity1 transaction1 or affiliation in a manner that functions as an evasion of the asset threshold that gives rise to the surcharge provided in subparagraph 7,a7 or otherwise violates such provision1 the appropriate ,federal banking agency shall order1 after due notice and opportunity for hearing1 the financial institution to restrict1 restructure1 or divest the offending activities1 transactions1 or investments4 7#c7 ,effective date ,the equity capital and surcharge rules issued under paragraphs 7#a7 and 7#b7 shall apply with respect to each financial institution not later than #e years after the date on which final rules are published in the ,federal ,register with respect to that financial institution4 7#d7 ,well-capitalized status 7,a7 ,compliance with other provisions ,any financial institution that meets the equity capital requirements established under paragraph 7#a7 or surcharge requirements established under paragraph 7#b7 shall be considered well capitalized for purposes of-- 7i7 section #ch of the ,federal ,deposit ,insurance ,act 7#ab ,u4,s4,c4 #ahcao72 and 7ii7 the early remediation requirements established pursuant to section #aff of the ,dodd-,frank ,wall ,street ,reform and ,consumer ,protection ,act 7#ab ,u4,s4,c4 #ecff74 7,b7 ,agency actions ,consistent with this section1 the appropriate ,federal banking agency1 in consultation with the other ,federal banking agencies1 shall1 by regulation1 establish the appropriate capital categories for financial institutions under section #ch of the ,federal ,deposit ,insurance ,act 7#ab ,u4,s4,c4 #ahcao7 and early remediation requirements established pursuant to section #aff of the ,dodd-,frank ,wall ,street ,reform and ,consumer ,protection ,act 7#ab ,u4,s4,c4 #ecff74 7#e7 ,enhanced prudential standards ,the equity capital and surcharge rules issued under paragraphs 7#a7 and 7#b7 shall be considered sufficient to satisfy the risk-based capital requirements and leverage limits for purposes of section #afe of the ,dodd-,frank ,wall ,street ,reform and ,consumer ,protection ,act 7#ab ,u4,s4,c4 #ecfe74 7b7 ,equity capital requirements for affiliates and subsidiaries of bank holding companies 7#a7 ,in general ,not later than #a year after the date of enactment of this ,act1 notwithstanding any other provision of law applicable to insured depository institutions1 the ,board 7subject to section #e7;c77#c7 of the ,bank ,holding ,company ,act of #aief 7#ab ,u4,s4,c4 #ahdd7;c77#c77 and section #aj7;g7 of the ,home ,owners' ,loan ,act 7#ab ,u4,s4,c4 #adfg;a7g7771 the ,corporation1 and the ,comptroller of the ,currency shall each promulgate regulations to establish capital requirements for each affiliate and subsidiary of a financial institution that are no less stringent than the equity capital requirements established under subsection 7a77#a7 or surcharge requirements established under subsection 7a77#b74 7#b7 ,limitation ,paragraph 7#a7 and the regulations issued under paragraph 7#a7 do not apply in the case of any financial institution with less than #ej1jjj1jjj1jjj in total consolidated assets4 7#c7 ,amendment to bank holding company act of #aief ,section #e7;c77#e77;,b7 of the ,bank ,holding ,company ,act of #aief 7#ab ,u4,s4,c4 #ahdd7;c77#e77;,b77 is amended-- 7,a7 by striking clauses 7i7 and 7v72 7,b7 in clause 7iv71 by striking 2 or and inserting a period2 7,c7 in clause 7iii71 by inserting or after the semicolon2 and 7,d7 by redesignating clauses 7ii7 through 7iv7 as clauses 7i7 through 7iii71 respectively4 7#d7 ,amendment to the ,home ,owner's ,loan ,act ,the ,home ,owner's ,loan ,act 7#ae ,u4,s4,c4 #adfa et seq47 is amended-- 7,a7 in section #b 7#ab ,u4,s4,c4 #adfb7 by adding at the end the following3 7#ab7 ,functionally regulated affiliate ,the term functionally regulated affiliate means1 with respect to a savings association1 any affiliate of such savings association that is a company described in section #e7;c77#e77;,b7 of the ,bank ,holding ,company ,act of #aief 7#ab ,u4,s4,c4 #ahdd7;c77#e77;,b774 2 and 7,b7 in section #aj7;g7 7#ab ,u4,s4,c4 #adfg;a7g77 by adding at the end the following3 7#f7 ,capital for functionally regulated subsidiaries and functionally regulated affiliates ,notwithstanding section #c7;b77#a7 of the ,terminating ,bailouts for ,taxpayer ,fairness ,act of #bjac1 the ,board may not1 by regulation1 guideline1 order1 or otherwise1 prescribe or impose any capital or capital adequacy rules1 guidelines1 standards1 or requirements on any functionally regulated subsidiary of a savings and loan holding company or functionally regulated affiliate of a savings association that-- 7,a7 is not a depository institution2 and 7,b7 is-- 7i7 in compliance with the applicable capital requirements of its ,federal regulatory authority 7including the ,securities and ,exchange ,commission7 or ,state insurance authority2 7ii7 properly registered as an investment adviser under the ,investment ,advisers ,act of #aidj1 or with any ,state2 or 7iii7 licensed as an insurance agent with the appropriate ,state insurance authority4 4 7c7 ,specific elements of capital requirements ,for purposes of calculating-- 7#a7 equity capital requirements under this section1 equity capital shall consist of tangible common equity 7defined as common stockholders' equity less goodwill71 deferred tax assets1 accumulated other comprehensive income1 treasury stock1 and intangible assets plus retained earnings2 and 7#b7 total consolidated assets under this section1 derivative exposures shall include-- 7,a7 the fair value of the derivative exposures without recognizing the benefits of any netting arrangement1 unless-- 7i7 the netting arrangement is documented under a formal master netting agreement or other formal arrangement with a derivatives clearing organization2 and 7ii7 the financial institution1 as a matter of ongoing business practice1 exchanges collateral on a daily basis for the fulfillment of variation margin requirements on a net basis1 and fulfills all contractual payment requirements1 including payments for contract termination1 on a net basis1 with such net exchange of collateral and payments encompassing all derivative exposures covered by the formal arrangement2 and 7,b7 off-balance sheet assets-- 7i7 defined as any assets in which the financial institution has guaranteed performance by another party or provided a liquidity backstop should another party be unable to perform under the contractual obligation2 and 7ii7 excluding commitments to lend1 whereby certain provisions and or covenants exist that limit the risk to the bank holding company with respect to future draws of liquidity4 7d7 ,risk-,based capital requirements permitted 7#a7 ,rule of construction ,except as provided in paragraph 7#b71 nothing in this section shall be interpreted to prevent any appropriate ,federal banking agency from establishing supplemental risk-based capital requirements for any financial institution with more than #bj1jjj1jjj1jjj in total consolidated assets1 or any affiliate or subsidiary of such institutions for the purpose of measuring the relative risk of certain assets and preventing investment in excessive amounts of riskier assets4 7#b7 ,limitation 7,a7 ,joint determination ,an appropriate ,federal banking agency may not implement risk-based capital requirements with respect to a financial institution with more than #bj1jjj1jjj1jjj1 unless all appropriate ,federal banking agencies agree that bank supervision is insufficient to prevent the excessive concentration of riskier assets4 7,b7 ,report to congress ,before proposing risk based capital rules described in this subsection1 the appropriate ,federal banking agencies shall submit a joint report to the ,committee on ,banking1 ,housing1 and ,urban ,affairs of the ,senate and the ,committee on ,financial ,services of the ,house of ,representatives detailing the deficiency in supervisory tools in preventing investment in excessive amounts of riskier assets and how risk based capital will be used4 ,the appropriate ,federal banking agencies may establish supplemental risk-based capital requirements that do not replace the equity capital requirements required by this ,act not earlier than #ij days after the date of submission of the report under this subparagraph4 7e7 ,treatment of basel ,,iii international accord ,the ,board1 the ,corporation1 and the ,comptroller of the ,currency shall be prohibited from any further implementation of any rules of the ,federal banking agencies regarding ,basel ,,iii3 ,a ,global ,regulatory ,framework for ,more ,resilient ,banks and ,banking ,systems4 #d4 ,prohibition on subsidy transfers ,section #bc;,a of the ,federal ,reserve ,act 7#ab ,u4,s4,c4 #cga;c7 is amended-- 7#a7 in subsection 7a71 by adding at the end the following3 7#e7 ,prohibition on transactions by insured depository institutions with affiliates or subsidiaries 7,a7 ,affiliate transactions prohibited ,except as provided in subparagraph 7,b71 only an insured depository institution that is a member bank or an affiliate or subsidiary of a member bank may engage in a covered transaction with another affiliate or subsidiary that is not an insured depository institution4 7,b7 ,exceptions ,notwithstanding subparagraph 7,a71 an insured depository institution that is not a member bank or an affiliate or subsidiary of a member bank may-- 7i7 engage in lawful dividend payments to its holding company2 or 7ii7 make sales of property or securities to1 or accept infusions of capital or other distributions from1 its parent holding company1 consistent with section #ch;,a of the ,federal ,deposit ,insurance ,act 7#ab ,u4,s4,c4 #ahcap74 2 and 7#b7 in subsection 7b7-- 7,a7 by redesignating paragraphs 7#h7 through 7#aa7 as paragraphs 7#i7 through 7#ab71 respectively2 and 7,b7 by inserting after paragraph 7#g7 the following3 7#h7 the term member bank means a member bank having less than #ej1jjj1jjj1jjj of total consolidated assets2 4 #e4 ,limitation on the ,federal safety net 7a7 ,prohibition against government assistance to non-,banks ,except in connection with the resolution of any insured depository institution or financial company for which the ,corporation has been appointed as receiver1 no affiliate or subsidiary of a financial institution1 or affiliate of an insured depository institution or nonbank financial institution may receive any assistance through-- 7#a7 asset purchases made by the ,united ,states ,government1 loans from the ,united ,states ,government1 investments in debt or equity made by the ,united ,states ,government1 or capital injections from the ,united ,states ,government2 7#b7 the ,exchange ,stabilization ,fund1 as established under section #b of the ,gold ,reserve ,act of #aicd2 7#c7 the ,deposit ,insurance ,fund established under section #aa7;a77#d7 of the ,federal ,deposit ,insurance ,act 7#ab ,u4,s4,c4 #ahba7;a77#d772 7#d7 the ,board1 pursuant to its authority under section #aj;,b1 #ac1 or #ac;,a of the ,federal ,reserve ,act 7#ab ,u4,s4,c4 #cdg;b1 #cdb1 and #cdc72 or 7#e7 the ,board1 pursuant to its authority under the third paragraph of section #ac of the ,federal ,reserve ,act 7#ab ,u4,s4,c4 #cdc74 7b7 ,exclusion for monetary policy ,subsection 7a7 shall not apply to transactions or operations implementing monetary policy matters under the direction of the ,federal ,open ,market ,committee or the ,board of ,governors of the ,federal ,reserve ,system4 7c7 ,lending to systemically important financial market utilities ,section #hjf of the ,dodd-,frank ,wall ,street ,reform and ,consumer ,protection ,act 7#ab ,u4,s4,c4 #fdee7 is amended-- 7#a7 by striking subsections 7a7 through 7c72 and 7#b7 redesignating subsections 7d7 and 7e7 as subsections 7a7 and 7b71 respectively4 7d7 ,termination of systemic risk exemption ,section #ac7;c77#d77;,g7 of the ,federal ,deposit ,insurance ,act 7#ab ,u4,s4,c4 #ahbc7;c77#d77 is amended-- 7#a7 by striking subparagraph 7,g72 and 7#b7 by redesignating subparagraph 7,h7 as subparagraph 7,g74 #f4 ,relief for community banks and small savings associations 7a7 ,rural definition ,for purposes of the rules of the ,bureau of ,consumer ,financial ,protection 7in this section referred to as the ,bureau7 regarding qualified mortgages for purposes of section #abi;,c7c77#b7 of the ,truth in ,lending ,act1 the definition of the term rural means any area other than-- 7#a7 a city or town that has a population of greater than #ej1jjj inhabitants2 and 7#b7 any urbanized area contiguous and adjacent to a city or town described in paragraph 7#a74 7b7 ,securities ,exchange ,act of #aicd ,the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #gh;a et seq47 is amended-- 7#a7 in section #ab7;g7 7#ae ,u4,s4,c4 #ghl7g77-- 7,a7 in paragraph 7#a77;,b71 by inserting after is a bank the following3 1 a savings and loan holding company 7as defined in section #aj of the ,home ,owners' ,loan ,act712 and 7,b7 in paragraph 7#d71 by inserting after case of a bank the following3 1 a savings and loan holding company 7as defined in section #aj of the ,home ,owners' ,loan ,act712 and 7#b7 in section #ae7;d71 by striking case of bank and inserting the following3 case of a bank1 a savings and loan holding company 7as defined in section #aj of the ,home ,owners' ,loan ,act714 7c7 ,federal reserve board ,the policy statement of the ,board in the ,small ,bank ,holding ,company ,statement found at ,part #bbe of the appendix to title #ab1 ,code of ,federal ,regulations 7or any successor thereto71 shall apply to financial institutions that are otherwise subject to that policy statement with consolidated assets of more than #e1jjj1jjj1jjj4 7d7 ,mutual holding company dividend waivers ,notwithstanding the rule of the ,board regarding ,mutual ,holding ,company ,dividend ,waivers in section #bci4fc of title #ab1 ,code of ,federal ,regulations 7or any successor thereto71 grandfathered mutual holding companies and all other mutual holding companies shall be permitted to waive the receipt of dividends declared on the common stock of their bank or mid-size holding companies4 7e7 ,examination ombudsman 7#a7 ,in general ,the ,federal ,financial ,institutions ,examination ,council ,act of #aigh 7#ab ,u4,s4,c4 #ccja et seq47 is amended by adding at the end the following3 #ajab4 ,office of ,examination ,ombudsman 7a7 ,establishment ,there is established in the ,council an ,office of ,examination ,ombudsman4 7b7 ,head of ,office ,there is established the position of the ,ombudsman1 who shall serve as the head of the ,office of ,examination ,ombudsman1 and who shall be hired separately by the ,council and shall be independent from any member agency of the ,council4 7c7 ,staffing ,the ,ombudsman is authorized to hire staff to support the activities of the ,office of ,examination ,ombudsman4 7d7 ,duties ,the ,ombudsman shall-- 7#a7 receive and1 at the ,ombudsman's discretion1 investigate complaints from financial institutions1 their representatives1 or another entity acting on behalf of such institutions1 concerning examinations1 examination practices1 or examination reports2 7#b7 hold meetings1 at least once every #c months and in locations designed to encourage participation from all sections of the ,united ,states1 with financial institutions1 their representatives1 or another entity acting on behalf of such institutions1 to discuss examination procedures1 examination practices1 or examination policies2 7#c7 review examination procedures of the ,federal financial institutions regulatory agencies to ensure that the written examination policies of those agencies are being followed in practice and adhere to the standards for consistency established by the ,council2 7#d7 conduct a continuing and regular program of examination quality assurance for all examination types conducted by the ,federal financial institutions regulatory agencies2 7#e7 process any supervisory appeal initiated under section #ajae or section #cji7;e7 of the ,riegle ,community ,development and ,regulatory ,improvement ,act of #aiid2 and 7#f7 report annually to the ,committee on ,financial ,services of the ,house of ,representatives1 the ,committee on ,banking1 ,housing1 and ,urban ,affairs of the ,senate1 and the ,council1 on the reviews carried out pursuant to paragraphs 7#c7 and 7#d71 including compliance with the requirements set forth in section #ajab regarding timeliness of examination reports1 and the ,council's recommendations for improvements in examination procedures1 practices1 and policies4 7e7 ,confidentiality ,the ,ombudsman shall keep confidential all meetings1 discussions1 and information provided by financial institutions4 4 7#b7 ,definition ,section #ajjc of the ,federal ,financial ,institutions ,examination ,council ,act of #aigh 7#ab ,u4,s4,c4 #ccjb7 is amended-- 7,a7 in paragraph 7#b71 by striking and at the end2 7,b7 in paragraph 7#c71 by adding and at the end2 and 7,c7 by adding at the end the following3 7#d7 the term ,ombudsman means the ,ombudsman established under section #ajab4 4 7f7 ,exception to annual written privacy notice requirement under the gramm-,leach-,bliley act ,section #ejc of the ,gramm-,leach-,bliley ,act 7#ae ,u4,s4,c4 #fhjc7 is amended by adding at the end the following3 7f7 ,exception to annual written notice requirement 7#a7 ,in general ,a financial institution described in paragraph 7#b7 shall not be required to provide an annual written disclosure under this section1 until such time as the financial institution fails to comply with subparagraph 7,a71 7,b71 or 7,c7 of paragraph 7#a74 7#b7 ,covered institutions ,paragraph 7#a7 applies with respect to a financial institution that-- 7,a7 provides nonpublic personal information in accordance with the provisions of subsection 7b77#b7 or 7e7 of section #ejb or regulations prescribed under section #ejd7;b72 7,b7 has not changed its policies and practices with respect to disclosing nonpublic personal information from the policies and practices that were disclosed in the most recent disclosure sent to consumers in accordance with this section2 and 7,c7 otherwise provides customers access to such most recent disclosure in electronic or other form permitted by regulations prescribed under section #ejd4 4 7g7 ,exemption from small business data collection ,section #gjd;,b7h77#a7 of the ,equal ,credit ,opportunity ,act 7#ae ,u4,s4,c4 #afia;c-#b7;h77#a77 is amended by inserting with more than #aj1jjj1jjj1jjj in total consolidated assets after entity4 7h7 ,dodd-,frank ,section #aga7;b77#e77;,c7 of the ,dodd-,frank ,wall ,street ,reform and ,consumer ,protection ,act 7#ab ,u4,s4,c4 #ecga7;b77#e77;,c77 is amended by inserting before the period at the end or savings and loan holding company with less than #ejj1jjj1jjj in total consolidated assets4