U.S. House of Representatives Committee on Financial Services Proposed Legislation in Response to Recent Bank Failures Introduced
June 21, 2023 – Several bills to respond to the recent failures of Silicon Valley Bank (SVB), Signature Bank, and First Republic Bank have been introduced in the U.S. House Committee on Financial Services. Such proposals include:
- H.R. 4208, Failed Bank Executives Accountability and Consequences Act, expanding bank regulatory authority with respect to clawing back compensation, imposing fines, and banning future work in the industry for bank executives that negligently contribute to their bank’s failure.
- H.R. 4209, Incentivizing Safe and Sound Banking Act, which would expand bank regulator authority to prohibit stock sales of bank executives, when appropriate, when issuing a cease-and-desist order to a bank for not complying with the law, and automatically restricting such stock sales by senior executives of large banks if it receives poor exam ratings or does not resolve supervisory citations, such as a matter requiring immediate attention, in a timely manner.
- H.R. 4210, Closing the Enhanced Prudential Standards Loophole Act, which imposes Dodd-Frank’s enhanced prudential standards on banks without bank holding companies.
- H.R. 3992, Effective Bank Regulation Act¸ which requires bank regulators to expand their stress testing requirements. Specifically, rather than doing two stress test scenarios, the bill would require five, and ensure that the Federal reserve does stress tests for situations when interest rates are rising or falling.
- H.R. 4206, Bank Safety Act, which would prevent large banks from opting out of the requirement to recognize Accumulated Other Comprehensive Income (AOCI) in regulatory capital, which primarily reflects the kind of unrealized losses Silicon Valley Bank had with its securities portfolio.
- H.R. 3914, Failing Bank Acquisition Fairness Act, which would ensure smaller banks can purchase failed banks by directing the FDIC to only consider the bids of a megabank with more than 10% of total deposits if no other institutions meet the least cost test to the FDIC.
- H.R. 4116, Systemic Risk Authority Transparency Act¸which requires that for any use of the systemic risk exception of FDIC’s least cost resolution test, this bill would require banking regulators and the Government Accountability Office (GAO) to produce the same kind of post-failure lessons learned reports that the Federal Reserve, FDIC, and GAO did in the aftermath of Silicon Valley Bank’s and Signature Bank’s failure. Initial reports would be due within 60 days after the systemic risk exception is triggered, with more comprehensive reports due within 180 days.
- H.R. 4204, Shielding Community Banks from Systemic Risk Assessments Act, which would permanently exempt banks with less than $5 billion in total assets from special assessments the FDIC must collect when a systemic risk exception is triggered. The bill would allow FDIC to set a higher threshold if warranted while requiring a minimal impact on banks with between $5 billion and $50 billion in total assets.
- H.R. 4062, Chief Risk Officer Enforcement and Accountability Act, which would codify regulatory requirements that large banks have a Chief Risk Officer (CRO). The bill also requires within 24 hours of a large bank’s CRO position being vacant, the bank must notify their federal and, if applicable, state prudential regulator of such vacancy. Within 7 days, they must submit a plan to their regulator on how they would search for and promptly hire a well-qualified CRO when there is a vacancy. After 60 days, if the CRO position remains vacant, the bank must notify the public and be subject to an automatic cap on their asset growth until such vacancy is cured.
- H.R. 4200, Fostering Accountability in Remuneration Fund Act of 2023, or FAIR Fund Act, which would require large financial institutions to have a portion of senior executive compensation placed into a deferred compensation pool that would get paid out between 2 years and 8 years depending on the size of the large financial institution. In the case of a company’s failure and/or executive misconduct, the fund would be used to cover the costs of paying any fines or resolving the firm. This would supplement incentive-based compensation rules required under Section 956 of Dodd-Frank.
- H.R. 4207, Stopping Bonuses for Unsafe and Unsound Banking Act¸which would restrict discretionary bonus payments to executives of any large bank does not resolve a Matter Requiring Immediate Attention or a similar supervisory citation from bank supervisors in a timely manner. Specifically, a bonus freeze would kick in if they do not submit an acceptable remediation plan by a submission deadline set by the regulators, and furthermore, a bonus freeze would take effect if they do not implement the remediation plan by the implementation deadline set by the regulators.
Read the full press release here
January 30, 2023 –
Today, the U.S. House of Representatives passed several pieces of bipartisan financial services legislation. Among the bipartisan bills passed are initiatives to combat the financial exploitation of our seniors and other vulnerable adults, streamline federal credit union board meeting requirements, and increase access to capital for rural small businesses.
The financial services bills passed by the House include:
H.R. 500, the Financial Exploitation Prevention Act, sponsored by Capital Markets Subcommittee Chairwoman Ann Wagner (MO-02), will help combat financial exploitation of seniors and vulnerable adults by providing at-risk investors with the protection they need to make sure they can receive the hard-earned savings that they have built up over the years.
“Right now, roughly 1 in 5 senior investors already fall prey to fraudsters, losing an estimated $2.9 billion annually… This bill provides a tool to fight against this type of elder abuse,” said Chairman Patrick McHenry (NC-10).
Watch Chairman McHenry’s remarks in support of H.R. 500 here.
H.R. 582, the Credit Union Board Modernization Act, co-sponsored by Oversight and Investigations Subcommittee Chairman Bill Huizenga (MI-04), will reduce the frequency of required board meetings for federal credit unions with demonstrated strong risk management practices.
Watch Chairman McHenry’s remarks in support of H.R. 582 here.
As reported by FinancialRegNews.com’s Dave Kovaleski:
The bill, H.R. 582, would update the Federal Credit Union Act to modify current federal requirements for federal credit union board meetings. Specifically, it would alter the requirements for how often boards are supposed to meet – changing it from once per month to once every other month.
“I’m proud that the House passed the Credit Union Board Modernization Act, which I introduced, along with Rep. Bill Huizenga, to change the outdated requirement and allow credit unions and their board members more flexibility,” Rep. Juan Vargas (D-CA) said. “This bipartisan legislation would give credit unions the ability to better dedicate their time and more effectively serve their members and communities.”
The bill would continue to allow credit union boards to meet as frequently as needed. In addition, there is still a requirement for monthly meetings for credit unions that exhibit unsound practices. It has the support of several organizations, including the Credit Union National Association (CUNA).
The legislation now moves to the Senate for consideration.
H.R. 298, the Expanding Access to Capital for Rural Job Creators Act, sponsored by Rep. Alex Mooney (WV-02), will help increase access to capital for rural entrepreneurs and small businesses.
“In rural areas, every small business and entrepreneur counts. They are the lifeblood of the local economy, and their success is critical to the success of their community,” said Chairman McHenry.
Watch Chairman Patrick McHenry’s (NC-10) remarks in support of H.R. 298 here.
- Thursday, December 1 at 10 a.m. ET: The full Committee will convene for a hybrid hearing entitled, “Boom and Bust: The Need for Bold Investments in Fair and Affordable Housing to Combat Inflation.”
- Tuesday, December 6 at 10 a.m. ET: The Subcommittee on Diversity and Inclusion will convene for a hybrid hearing entitled, “Unfinished Business: A Review of Progress Made and a Plan to Achieve Full Economic Inclusion for Every American.”
- Tuesday, December 6 at 2 p.m. ET: The Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets will convene for a hybrid hearing entitled, “E, S, G and W: Examining Private Sector Disclosure of Workforce Management, Investment, and Diversity Data.”
- Wednesday, December 7 at 10 a.m. ET: The Subcommittee on Oversight & Investigations will convene for a hybrid hearing entitled, “An Enduring Legacy: The Role of Financial Institutions in the Horrors of Slavery and the Need for Atonement, Part II.”
- Tuesday, December 13 at 10 a.m. ET: The full Committee will convene for a hybrid hearing entitled, “Investigating the Collapse of FTX, Part I.”
- Wednesday, December 14 at 10 a.m. ET: The full Committee will convene for a hybrid hearing entitled, “Consumers First: Semi-Annual Report of the Consumer Financial Protection Bureau.”
All hearings are livestreamed on https://financialservices.house.gov/live/.
Chairwoman of the House Committee on Financial Services, delivered the following statement at a Subcommittee on National Security, International Development, and Monetary Policy hearing entitled, “Under the Radar: Alternative Payment Systems and the National Security Impacts of Their Growth.”
Thank you very much, Chairman Himes, for convening this hearing on the current and future national security challenges related to the growth of alternative payment systems. These systems can drive inclusion and offer convenience, but because they are generally outside of the western financial system, they also offer opportunities for sanctions evasion and other financial crime.
Further, they rival U.S. dollar-led trade and payments systems, potentially undermining the strength of the dollar and our ability to leverage tools like economic and trade sanctions. So, I look forward to hearing from today’s witnesses on what Congress needs to consider regarding this growing concern.
(May 14, 2021) The small-dollar loan program of the Treasury’s Community Development Financial Institution (CDFI) Fund related to credit unions is the subject of a webinar planned for May 27 by the CDFI and NCUA. The one-hour event will describe the program and discuss eligibility of permissible uses of funds through the program, NCUA said in a release. It added that credit unions that are not certified as CDFIs may still be eligible for the program through partnerships with CDFIs or any federally insured depository institution whose primary mission is serving targeted investment areas … Federal financial institution regulators – including NCUA (likely Board Chairman Todd Harper) — are due to testify next Wednesday (May 19) before the House Financial Services Committee in an oversight hearing; the session gets underway at 10 a.m. (and will be streamed, live, via the Internet) … Credit union and banking trade associations this week wrote in opposition to legislation aimed at reversing a Supreme Court decision clarifying that a business engaged in non-judicial foreclosure proceedings is not a debt collector. The Non-Judicial Foreclosure Debt Collection Clarification Act (H.R. 2547), a bill that would reverse the 2019 decision in Obduskey v. McCarthy and Holthus LLP, which clarified that entities enforcing a security interest, without also seeking repayment or deficiency judgement, generally do not qualify as debt collectors under the Fair Debt Collection Practices Act (FDCPA). The groups contend that the bill would “disrupt the choices states have made in structuring their foreclosure regimes, imposing unnecessary costs and delay to the enforcement of real property interests and subsequently increasing the cost of credit.”
LINKS:
NCUA, CDFI Fund to Cohost Webinar on Small-Dollar Loan Program
Diversity, accountability, and safety and soundness of financial institutions during the coronavirus crisis will be topics when federal financial institution regulators – including NCUA Board Chairman Rodney Hood — appear before the House Financial Services Committee Nov. 12, the committee chairman announced Tuesday.
In a press release, committee Chairwoman Maxine Waters said the hearing would be a virtual one – that is, all committee members and witnesses participate remotely with no in-person participation in the hearing room.
Past such hearings – including one held Dec. 4, 2019 by the committee – featured Hood, FDIC Chairman Jelena McWilliams, Federal Board Vice Chair for Supervision Randal Quarles, and (now former) Comptroller of the Currency Joseph M. Otting. Otting resigned his office in late May; he was replaced by Brian P. Brooks as acting comptroller.
The hearing is scheduled to get underway at noon ET.