HB 20-4: Too Big to Fail, Too Big to Exist Act (Passed)

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Passed 4-3-1-1.

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A BILL

To break up big banks.

Section 1: Short title

This Act may be cited as the “Too Big to Fail, Too Big to Exist Act”.

Section 2: Content

(a) Definitions.—In this section—

(1) the term “covered entity”—

(A) means a financial institution, as defined in section 803 of the Payment, Clearing, and Settlement Supervision Act of 2010 (12 U.S.C. 5462); and

(B) does not include—

(i) a Farm Credit System institution chartered under and subject to the provisions of the Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.);

(ii) a governmental entity; or

(iii) a regulated entity, as defined in section 1303 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (12 U.S.C. 4502); and

(2) the term “gross domestic product” means gross domestic product as calculated by the Bureau of Economic Analysis of the Department of Commerce.

(b) Total exposure.—

(1) TOTAL EXPOSURE.—

(A) IN GENERAL.—On February 1, May 1, August 1, and November 1 of each year, no covered entity may have a total exposure, as reported by the covered entity on the Federal Reserve form required to monitor the systemic risk profile of financial institutions for the previous reporting period, equal to or greater than 3 percent of the most recent estimate for annual gross domestic product of the United States (in current dollars) for the previous calendar year.

(B) OTHER REPORTING.—If a covered entity is not required to complete a Federal Reserve form required to monitor the systemic risk profile of financial institutions, the Financial Stability Oversight Council shall design and assign a quarterly reporting form as appropriate for each covered entity with total assets greater than $50,000,000,000 that reflects the total risk exposures of the financial institution, including off-balance sheet exposures and derivatives exposure within 18 months of the date of enactment of this Act. Once designated a reporting form, on February 1, May 1, August 1, and November 1 no covered entity may have a total exposure, as reported by the covered entity for the previous reporting period, equal to or greater than 3 percent of the most recent estimate for annual gross domestic product of the United States (in current dollars) for the previous calendar year.

(2) RESTRUCTURING.—

(A) IN GENERAL.—

(i) DESIGNATION.—Any covered entity that violates paragraph (1) shall immediately be designated as a “Too Big to Exist Institution” by the Financial Stability Oversight Council.

(ii) SUPERVISION.—The Vice Chair for Supervision of the Board of Governors of the Federal Reserve System, or during any period in which that position is vacant, the Chair of the Board of Governors of the Federal Reserve System, shall require and supervise a “Too Big to Exist Institution” to restructure to comply with paragraph (1) not later than 2 years after the date on which the first violation arises.

(B) SUBSEQUENT REQUIREMENTS.—After the date on which a covered entity is required to restructure under subparagraph (A), the Vice Chair for Supervision of the Board of Governors of the Federal Reserve System or, during any period in which that position is vacant, the Chair of the Board of Governors of the Federal Reserve System, shall require and supervise any “Too Big to Exist Institution” to restructure to comply with paragraph (1) not later than 1 year after the institution is again found to be in excess of the threshold specified in paragraph (1).

(c) Prohibition against use of federal reserve financing.—Notwithstanding any other provision of law (including regulations), any “Too Big to Exist Institution” may not use or otherwise have access to advances from any Federal Reserve credit facility, the Federal Reserve discount window, or any other program or facility made available under the Federal Reserve Act (12 U.S.C. 221 et seq.), including any asset purchases, temporary or bridge loans, government investments in debt or equity, or capital injections from any Federal institution.

(d) Prohibition on use of insured deposits.—

(1) IN GENERAL.—Any “Too Big to Exist Institution” that is an insured depository institution, or owns such an institution, may not use any insured deposit amounts to fund—

(A) any activity relating to hedging that is not directly related to commercial banking activity at the insured bank;

(B) any creation or use of derivatives for speculative purposes;

(C) any activity related to the dealing of derivatives;

(D) any creation of, or lending against, new or existing forms of structured or structured derivatives products, including col­lat­er­al­ized debt obligations, col­lat­er­al­ized loan obligations, and synthetic derivatives of col­lat­er­al­ized debt obligations and col­lat­er­al­ized loan obligations; or

(E) any other form of speculative activity that regulators specify.

(2) RISK OF LOSS.—A “Too Big to Exist Institution” may not conduct any activity listed in paragraph (1) in such a manner that—

(A) puts insured deposits at risk; or

(B) creates a risk of loss to the Deposit Insurance Fund.

(e) Report; testimony.—The Vice Chair for Supervision of the Board of Governors of the Federal Reserve System, or during any period in which that position is vacant, the Chair of the Board of Governors of the Federal Reserve System, and the Chair of the Financial Stability Oversight Council shall annually testify before the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives and submit to those committees an annual report the restructuring and designation under subsection (b)(2).

(f) Effective date.—Subsections (c) and (d) shall apply to a covered entity 90 days after the date on which a covered entity is designated as a “Too Big to Exist Institution”.

House of Representatives
Passed the House of Representatives 4-3-1-1
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