Report text available as:

(PDF provides a complete and accurate display of this text.) Tip?



114th Congress     }                                          {  Report
                        HOUSE OF REPRESENTATIVES
 2d Session        }                                          {  114-871

======================================================================



 
     FINANCIAL STABILITY OVERSIGHT COUNCIL IMPROVEMENT ACT OF 2015

                                _______
                                

 December 12, 2016.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

Mr. Hensarling, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 1550]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 1550) to amend the Financial Stability Act of 
2010 to improve the transparency of the Financial Stability 
Oversight Council, to improve the SIFI designation process, and 
for other purposes, having considered the same, report 
favorably thereon without amendment and recommend that the bill 
do pass.

                          Purpose and Summary

    H.R. 1550 amends the Financial Stability Act of 2010 to 
require the Financial Stability Oversight Council (FSOC), when 
determining whether to subject a nonbank financial company to 
supervision by the Board of Governors of the Federal Reserve 
System, to consider the appropriateness of imposing such 
standards as opposed to other forms of regulation to mitigate 
identified risks to U.S. financial stability. The bill also 
provides for annual and periodic reevaluation of FSOC 
determinations, enhanced procedures for making additional 
determinations, and periodic FSOC assessments of the impact of 
its designations.

                  Background and Need for Legislation

    Section 113 of the Dodd-Frank Act authorizes the FSOC to 
determine that the material financial distress of a nonbank 
financial company could pose a threat to the financial 
stability of the United States. Once the FSOC makes a 
determination regarding a nonbank financial company, the 
nonbank financial company becomes subject to heightened 
prudential supervision and regulation by the Fed. The FSOC is 
required to consider a number of factors when making its 
determination. H.R. 1550 would add an additional factor that 
the FSOC would be required to consider before designating a 
nonbank financial company as systemically important. 
Specifically, the FSOC would be required to consider the 
``appropriateness of the imposition of prudential standards as 
opposed to other forms of regulation to mitigate the identified 
risks.''
    Section 113(e) requires the FSOC to provide a nonbank 
financial company written notice of a proposed designation 
determination, including an explanation of the basis of the 
proposed determination. The nonbank financial company is 
entitled to a hearing and can submit written materials 
contesting a proposed determination. H.R. 1550 would require 
the FSOC, upon identifying a nonbank financial company as a 
potential threat to the financial stability of the United 
States, to provide the nonbank financial company with a written 
notice that explains with specificity the basis for identifying 
the company and would require a copy of the notice to be 
provided to the company's primary financial regulatory agency.
    Upon receiving a notice of potential designation, a company 
would be provided an opportunity to submit written materials 
for consideration by the FSOC and meet with the FSOC to discuss 
the FSOC's analysis. The FSOC would be required to give the 
nonbank financial company a list of the public sources of 
information being considered by the FSOC. The FSOC would then 
be permitted to approve a resolution that identifies with 
specificity any risks to the financial stability of the United 
States that the FSOC has identified relating to the nonbank 
financial company by a vote of at least 2/3rds of the voting 
members of the FSOC (including the affirmative vote of the 
Treasury Secretary). The nonbank financial company's primary 
financial regulatory agency would have 180 days to consider the 
risks identified in the resolution and provide a written 
response to the FSOC that includes its assessment of the risks 
identified and the degree to which they are or could be 
addressed by existing regulation and, as appropriate, issue 
proposed regulations or undertake other regulatory action to 
mitigate the identified risks. In addition, the nonbank 
financial company would be (i) permitted to meet with the FSOC 
to discuss the FSOC's analysis, (ii) permitted to submit 
written materials to the FSOC, (iii) entitled to receive an 
explanation from the FSOC of how any request by the FSOC for 
information from the nonbank financial company relates to the 
potential systemic risks posed by the company; and (iv) 
entitled to receive written notice when the FSOC deems its 
evidentiary record to be complete.
    After following the above process, the FSOC could, by a 
vote of at least 2/3rds of the voting members of the FSOC 
(including the affirmative vote of the Treasury Secretary) make 
a proposed designation of a company. Prior to making a proposed 
designation, the FSOC would be required to determine that any 
proposed regulations or other regulatory actions taken by the 
primary financial regulatory agency are insufficient to 
mitigate the risks identified in the resolution. If the FSOC 
makes a proposed designation, it would be required to provide 
an explanation of the specific risks to the financial stability 
of the United States presented by the nonbank financial company 
and a detailed explanation of why existing regulations are 
insufficient. Following a proposed designation, the nonbank 
financial company would be permitted to request a hearing 
before the FSOC to contest its decision and present a 
remediation plan to modify the company's business, structure, 
or operations. If the FSOC approves the remediation plan, then 
the FSOC would monitor implementation of the plan. If the FSOC 
rejects the remediation plan, then the FSOC could vote to make 
a final designation.
    Section 113(d) currently requires the FSOC annually to 
reevaluate each determination and rescind any determination if 
at least 2/3rds of the voting members of the FSOC (including 
the affirmative vote of the Treasury Secretary) determine that 
the material financial distress of the nonbank financial 
company could not pose a threat to the financial stability of 
the United States. H.R. 1550 would amend this provision and 
require the FSOC, in connection with its annual review, to 
allow each designated company (i) an opportunity to submit 
written materials to contest the determination, (ii) provide 
each designated company an opportunity to meet with the FSOC, 
and (iii) provide the designated company and its primary 
financial regulatory agency with the reasons for the FSOC's 
decision to maintain a designation. In addition, the FSOC would 
be required at least every five years to conduct a reevaluation 
of a determination and hold a vote on whether to rescind a 
determination. In connection with this five-year review, the 
company would be permitted to submit a remediation plan that 
would explain how the company could modify its business, 
structure, or operations. The FSOC would be required to 
consider whether the plan, if implemented, would cause the 
company to no longer pose a threat to the financial stability 
of the United States.
    H.R. 1550 would also require the FSOC to disclose in its 
annual report the number of nonbank financial companies from 
the previous year that were subject to preliminary analysis, 
further review, and a proposed or final determination. The FSOC 
would be required to publish information regarding its 
methodology for calculating any quantitative thresholds or 
other metrics used to identify nonbank financial companies for 
analysis by the FSOC. In addition, the FSOC would be required 
every five years to conduct a study of the FSOC's 
determinations and comprehensively assess the impact of such 
determinations, including whether such determinations are 
having the intended result of improving the financial stability 
of the United States.
    In a letter of support for H.R. 1550 dated November 2, 
2015, the Financial Services Roundtable wrote:

          [H.R. 1550] would bring greater transparency to the 
        Financial Services Oversight Council (FSOC). The goal 
        of FSOC is to identify and mitigate systemic risk. 
        Asset managers are different than banks, however. The 
        standards for assessing their risk exposures should be 
        measured by risk-related activities and not simply the 
        amount of assets under management. H.R. 1550 will 
        improve accountability and transparency by requiring 
        FSOC to identify the reasons it believes a nonbank 
        entity should be declared a Systemically Important 
        Financial Institution (SIFI), and allow the entity the 
        opportunity to ``de-risk'' before being designated. 
        Importantly, the bill will also allow the nonbanks' 
        primary regulator to first address any identified 
        risks. This common-sense approach has strong bipartisan 
        support.

                                Hearings

    The Committee on Financial Services' Subcommittee on 
Financial Institutions held a hearing examining matters 
relating to H.R. 1550 on July 8, 2015.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
November 3, 2015 and November 4, 2015, and ordered H.R. 1550 to 
be reported favorably to the House without amendment by a 
recorded vote of 44 yeas to 12 nays (recorded vote no. FC-66), 
a quorum being present.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. The 
sole recorded vote was on a motion by Chairman Hensarling to 
report the bill favorably to the House without amendment. The 
motion was agreed to by a recorded vote of 44 yeas to 12 nays 
(Record vote no. FC-66), a quorum being present.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the findings and recommendations of 
the Committee based on oversight activities under clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
are incorporated in the descriptive portions of this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee states that H.R. will 
promote accountability in the designation of systemically 
important nonbank financial institutions for Federal Reserve 
supervision and regulation by, among other things, reforming 
the process leading to designation and requiring review of 
whether such designations remain appropriate and are having 
their intended effect of reducing risks to the U.S. financial 
system.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                 Congressional Budget Office Estimates

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                Washington, DC, September 15, 2016.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1550, the 
Financial Stability Oversight Council Improvement Act of 2015.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Sarah Puro.
            Sincerely,
                                                        Keith Hall.
    Enclosure.

H.R. 1550--Financial Stability Oversight Council Improvement Act of 
        2015

    Summary: H.R. 1550 would require the Financial Stability 
Oversight Council (FSOC) to change the procedures by which it 
designates certain companies as systemically important 
financial institutions (SIFIs). Those procedural changes would 
apply only to SIFIs that are not banking institutions and would 
affect the regulatory activities of other federal financial 
regulators including the Board of Governors of the Federal 
Reserve.
    Based on information from FSOC and other federal financial 
regulators, CBO estimates that enacting the legislation would 
increase net direct spending by $73 million and increase 
revenues by $22 million over the next 10 years, leading to a 
net increase in the deficit of $51 million over the 2017-2026 
period. Some of that cost would be recovered from financial 
institutions in the years after 2026. Pay-as-you-go procedures 
apply because enacting the legislation would affect direct 
spending and revenues.
    CBO estimates that enacting the legislation would not 
increase net direct spending or on-budget deficits by more than 
$5 billion in any of the four consecutive 10-year periods 
beginning in 2027.
    H.R. 1550 contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act (UMRA).
    CBO expects that the federal financial regulators would 
increase fees and other assessments to offset the costs of 
implementing the bill. Doing so would increase the cost of an 
existing private-sector mandate on entities required to pay 
those assessments. Based on information from the federal 
financial regulators, CBO estimates that the aggregate increase 
in fees and assessments would fall well below the annual 
threshold established in UMRA for private-sector mandates ($154 
million in 2016, adjusted for inflation).
    Estimated cost to the Federal Government: The estimated 
budgetary effect of H.R. 1550 is shown in the following table. 
The costs of this legislation fall within budget function 370 
(commerce and housing credit).

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                       By fiscal year, in millions of dollars--
                                                             -------------------------------------------------------------------------------------------
                                                               2017   2018   2019   2020   2021   2022   2023   2024   2025   2026  2017-2021  2017-2026
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                        NET INCREASE IN THE DEFICIT FROM CHANGES IN DIRECT SPENDING AND REVENUES
 
Administrative Costs to Financial Regulators to Review and        2      3      2      2      2      2      2      2      2      2        11         21
 Designate Financial Institutionsa..........................
Additional Costs to resolve Non-Bank Financial Institutionsb      0      0      1      3      5      5      4      4      4      4         9         30
    Total Increase in the Deficit...........................      2      3      3      5      7      7      6      6      6      6        20         51
Memorandum: Components of the Net Increase in the Deficit
 
                                                              INCREASES IN DIRECT SPENDING
 
Total Changes in Direct Spending:
    Estimated Budget Authority..............................      2      4      5      7      9     10      9      9      9     10        26         73
    Estimated Outlays.......................................      2      4      5      7      9     10      9      9      9     10        26         73
 
                                                                  INCREASES IN REVENUES
 
Total Changes in Revenues...................................      0      1      2      2      2      3      3      3      3      4         6         22
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Congressional Budget Office.
Notes: Amounts may not sum to totals because of rounding; FDIC = Federal Deposit Insurance Corporation.
aAdministrative costs to financial regulators include costs incurred by the Federal Deposit Insurance Corporation, the Financial Stability Oversight
  Council, the Office of the Comptroller of the Currency, the National Credit Union Administration, and the Federal Reserve System. Costs to the Federal
  Reserve System reduce remittances to the Treasury (which are recorded in the budget as revenues). Administrative costs to the financial regulators are
  typically offset, over time, by assessments levied on financial industries.
bAdditional costs to resolve financial institutions under H.R. 1550 would be eventually offset, by increased assessments on federally insured depository
  institutions. Some of those increases would occur after 2026.

    Basis of estimate: The budgetary effects of the legislation 
would stem from increased administrative costs to the federal 
financial regulators and costs to resolve certain financial 
institutions. CBO estimates that provisions in the bill that 
would change the standards and procedures for designating 
systemically important financial institutions would slightly 
increase the probability of losses to the Federal Deposit 
Insurance Corporation (FDIC) from resolving possible future 
defaults by certain nonbank financial institutions. The FDIC 
can eventually recover its costs for resolving those defaults 
from assessments on the financial industry; however, CBO 
estimates that such recoveries would occur over many years, 
resulting in a small additional net increase in deficits over 
the 2017-2026 period.
    For this estimate, CBO assumes that the bill will be 
enacted near the end of 2016 and that spending will follow 
historical patterns.

Administrative costs to financial regulators to review and designate 
        financial institutions

    Enacting H.R. 1550 would change the procedures and timeline 
FSOC uses to designate nonbank financial institutions (such as 
insurance companies) as SIFIs. Provisions in the bill would 
increase the workload of FSOC and other financial regulators 
that are charged with designating such firms as SIFIs. Based on 
information from FSOC, CBO estimates that FSOC and the federal 
financial regulators would need to hire an additional 20 to 30 
people (with average salaries of around $200,000) to comply 
with the requirements of the bill. About half of those staff 
would be required to assist with implementing new requirements 
associated with conducting annual reviews of nonbank financial 
firms and about half would be required to assist with reviewing 
and identifying firms that may be designated in the future. As 
a result, CBO estimates that enacting the administrative 
provisions of H.R. 1550, assuming a partial recovery of 
administrative costs from private entities (some of which are 
recorded as revenues in the budget), would increase budget 
deficits by $21 million over the 2017-2026 period.

Additional costs to the FDIC to resolve non-bank financial institutions

    Under current law, non-bank firms that are designated as 
SIFIs are subject to enhanced prudential regulation by the 
Board of Governors of the Federal Reserve. Those regulations 
are designed to be similar to those imposed on banks, which 
typically require SIFIs to undergo special stress tests, 
develop resolution plans, and maintain certain levels of 
liquidity and loss absorbing capacity. Based on information 
from national credit rating agencies and from academic, 
industry, and regulatory experts, CBO concludes that the added 
capital and transparency that results from those enhanced 
prudential regulations improve the safety and soundness of the 
affected firms.\1\ On balance, CBO estimates that such 
regulation lowers the FDIC's cost of resolving insolvent firms 
through the Orderly Liquidation Fund by 2 percent to 3 percent, 
primarily because those measures should result in shareholders 
and other creditors absorbing a larger share of any losses in 
the event of insolvency.
---------------------------------------------------------------------------
    \1\See, for example, Standard and Poors, ``Dodd-Frank Five Years 
Later: The Good, the Questionable, and the Unintended,'' July 1, 2015.
---------------------------------------------------------------------------
    CBO expects that the revised standards and procedures in 
H.R. 1550 could delay when some nonbank firms are designated as 
SIFIs and may reduce the number of firms so designated. Under 
current law, CBO estimates that enhanced prudential regulation 
of nonbank SIFIs will reduce the net losses incurred by the 
FDIC by about $150 million over the next 10 years. Based on 
recent trends in the designation process, CBO estimates that 
the amount of nonbank assets subject to enhanced regulation 
would be about 20 percent smaller over the next ten years under 
this bill, resulting in additional net costs totaling $30 
million over the 2017-2026 period. Most of those losses would 
be offset after 2026 by income to the FDIC from fees paid by 
insured depository institutions and large financial firms.
    Pay-As-You-Go considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. The net changes in outlays and revenues that are 
subject to those pay-as-you-go procedures are shown in the 
following table.

        CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 1550, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON FINANCIAL SERVICES ON NOVEMBER 5, 2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    By fiscal year, in millions of dollars--
                                                      --------------------------------------------------------------------------------------------------
                                                        2016   2017   2018   2019   2020   2021   2022   2023   2024   2025   2026  2016-2021  2016-2026
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               NET INCREASE IN THE DEFICIT
 
Statutory Pay-As-You-Go Impact.......................      0      2      3      3      5      7      7      6      6      6      6       20         51
Memorandum:
    Changes in Outlays...............................      0      2      4      5      7      9     10      9      9      9     10       26         73
    Changes in Revenues..............................      0      0      1      2      2      2      3      3      3      3      4        6         22
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Increase in long-term direct spending and deficits: CBO 
estimates that enacting the legislation would not increase net 
direct spending or on-budget deficits by more than $5 billion 
in any of the four consecutive 10-year periods beginning in 
2027.
    Estimated impact on state, local, and tribal governments: 
H.R. 1550 contains no intergovernmental mandates as defined in 
UMRA and would impose no costs on state, local, or tribal 
governments.
    Estimated impact on the private sector: CBO expects that 
the federal financial regulators would increase fees and 
assessments to offset the costs of implementing the additional 
regulatory activities required by the bill. Doing so would 
increase the cost of an existing mandate on private entities 
required to pay those assessments. Based on information from 
the agencies, CBO estimates that incremental cost of the 
mandate would amount to about $37 million over the 2017-2026 
period and, in aggregate, would fall well below the annual 
threshold established in UMRA for private-sector mandates ($154 
million in 2016, adjusted annually for inflation).
    Previous estimates: On July 29, 2015, CBO transmitted a 
cost estimate for S. 1484, the Financial Regulatory Improvement 
Act of 2015, as ordered reported by the Senate Committee on 
Banking, Housing, and Urban Affairs on June 2, 2015. Title II 
of that bill includes provisions that would modify the 
processing for designating nonbank SIFIs. The specific 
requirements in H.R. 1550 differ from those in S. 1484, but CBO 
estimates that the net budgetary effect of the provisions in 
the two bills would be similar.
    Estimate prepared by: Federal Costs: Sarah Puro and 
Kathleen Gramp; Revenues: Nathaniel Frentz; Impact on State, 
Local, and Tribal Governments: J'nell Blanco Suchy; Impact on 
the Private Sector: Logan Smith.
    Estimate approved by: Theresa Gullo, Assistant Director for 
Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of the section 
102(b)(3) of the Congressional Accountability Act.

                         Earmark Identification

    H.R. 1550 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

                    Duplication of Federal Programs

    Pursuant to section 3(g) of H. Res. 5, 114th Cong. (2015), 
the Committee states that no provision of H.R. 1550 establishes 
or reauthorizes a program of the Federal Government known to be 
duplicative of another Federal program, a program that was 
included in any report from the Government Accountability 
Office to Congress pursuant to section 21 of Public Law 111-
139, or a program related to a program identified in the most 
recent Catalog of Federal Domestic Assistance.

                   Disclosure of Directed Rulemaking

    Pursuant to section 3(i) of H. Res. 5, 114th Cong. (2015), 
the Committee states that H.R. 1550 contains no directed 
rulemaking.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    This Section cites H.R. 1550 as the ``Financial Stability 
Oversight Council Improvement Act of 2015''.

Section 2. SIFI designation process

    Amends section 113 of the Financial Stability Act of 2010 
to require the FSOC to examine the impact on the U.S. financial 
system of imposing heightened prudential standards by the 
Federal Reserve in lieu of other regulation.
    In addition, this section directs the FSOC to reevaluate, 
both annually and periodically, final determinations of 
systemic risk regarding a nonbank financial company under 
supervision by the Federal Reserve. Where a reevaluation 
determines that a nonbank financial company no longer poses a 
threat to the financial stability of the United States, 
affirmed by a vote of 2/3rds of the FSOC voting membership, 
this bill directs FSOC to rescind the determination.
    Further, this section prescribes procedural requirements 
for proposed FSOC determinations and final decision-making, 
including: written notification, opportunity to submit written 
materials to FSOC as part of the initial evaluation, 
opportunity to meet with the FSOC to discuss the analysis, and 
disclosure of the public sources of information considered by 
the FSOC as part of its analysis.
    Finally, this section directs the FSOC every five years to 
study: (1) the impact of its determinations to subject nonbank 
financial companies to supervision by the Federal Reserve and 
prudential standards, and (2) whether such determinations have 
the intended result of improving domestic financial stability.

Section 3. Rule of construction

    This section stipulates that this bill does not limit the 
powers of the FSOC to implement their emergency powers under 
section 113(f) of the Financial Stability Act.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, and existing law in which no 
change is proposed is shown in roman):

           SECTION 113 OF THE FINANCIAL STABILITY ACT OF 2010

SEC. 113. AUTHORITY TO REQUIRE SUPERVISION AND REGULATION OF CERTAIN 
                    NONBANK FINANCIAL COMPANIES.

  (a) U.S. Nonbank Financial Companies Supervised by the Board 
of Governors.--
          (1) Determination.--The Council, on a nondelegable 
        basis and by a vote of not fewer than \2/3\ of the 
        voting members then serving, including an affirmative 
        vote by the Chairperson, may determine that a U.S. 
        nonbank financial company shall be supervised by the 
        Board of Governors and shall be subject to prudential 
        standards, in accordance with this title, if the 
        Council determines that material financial distress at 
        the U.S. nonbank financial company, or the nature, 
        scope, size, scale, concentration, interconnectedness, 
        or mix of the activities of the U.S. nonbank financial 
        company, could pose a threat to the financial stability 
        of the United States.
          (2) Considerations.--In making a determination under 
        paragraph (1), the Council shall consider--
                  (A) the extent of the leverage of the 
                company;
                  (B) the extent and nature of the off-balance-
                sheet exposures of the company;
                  (C) the extent and nature of the transactions 
                and relationships of the company with other 
                significant nonbank financial companies and 
                significant bank holding companies;
                  (D) the importance of the company as a source 
                of credit for households, businesses, and State 
                and local governments and as a source of 
                liquidity for the United States financial 
                system;
                  (E) the importance of the company as a source 
                of credit for low-income, minority, or 
                underserved communities, and the impact that 
                the failure of such company would have on the 
                availability of credit in such communities;
                  (F) the extent to which assets are managed 
                rather than owned by the company, and the 
                extent to which ownership of assets under 
                management is diffuse;
                  (G) the nature, scope, size, scale, 
                concentration, interconnectedness, and mix of 
                the activities of the company;
                  (H) the degree to which the company is 
                already regulated by 1 or more primary 
                financial regulatory agencies;
                  (I) the amount and nature of the financial 
                assets of the company;
                  (J) the amount and types of the liabilities 
                of the company, including the degree of 
                reliance on short-term funding; [and]
                  (K) the appropriateness of the imposition of 
                prudential standards as opposed to other forms 
                of regulation to mitigate the identified risks; 
                and
                  [(K)] (L) any other risk-related factors that 
                the Council deems appropriate.
  (b) Foreign Nonbank Financial Companies Supervised by the 
Board of Governors.--
          (1) Determination.--The Council, on a nondelegable 
        basis and by a vote of not fewer than \2/3\ of the 
        voting members then serving, including an affirmative 
        vote by the Chairperson, may determine that a foreign 
        nonbank financial company shall be supervised by the 
        Board of Governors and shall be subject to prudential 
        standards, in accordance with this title, if the 
        Council determines that material financial distress at 
        the foreign nonbank financial company, or the nature, 
        scope, size, scale, concentration, interconnectedness, 
        or mix of the activities of the foreign nonbank 
        financial company, could pose a threat to the financial 
        stability of the United States.
          (2) Considerations.--In making a determination under 
        paragraph (1), the Council shall consider--
                  (A) the extent of the leverage of the 
                company;
                  (B) the extent and nature of the United 
                States related off-balance-sheet exposures of 
                the company;
                  (C) the extent and nature of the transactions 
                and relationships of the company with other 
                significant nonbank financial companies and 
                significant bank holding companies;
                  (D) the importance of the company as a source 
                of credit for United States households, 
                businesses, and State and local governments and 
                as a source of liquidity for the United States 
                financial system;
                  (E) the importance of the company as a source 
                of credit for low-income, minority, or 
                underserved communities in the United States, 
                and the impact that the failure of such company 
                would have on the availability of credit in 
                such communities;
                  (F) the extent to which assets are managed 
                rather than owned by the company and the extent 
                to which ownership of assets under management 
                is diffuse;
                  (G) the nature, scope, size, scale, 
                concentration, interconnectedness, and mix of 
                the activities of the company;
                  (H) the extent to which the company is 
                subject to prudential standards on a 
                consolidated basis in its home country that are 
                administered and enforced by a comparable 
                foreign supervisory authority;
                  (I) the amount and nature of the United 
                States financial assets of the company;
                  (J) the amount and nature of the liabilities 
                of the company used to fund activities and 
                operations in the United States, including the 
                degree of reliance on short-term funding; [and]
                  (K) the appropriateness of the imposition of 
                prudential standards as opposed to other forms 
                of regulation to mitigate the identified risks; 
                and
                  [(K)] (L) any other risk-related factors that 
                the Council deems appropriate.
  (c) Antievasion.--
          (1) Determinations.--In order to avoid evasion of 
        this title, the Council, on its own initiative or at 
        the request of the Board of Governors, may determine, 
        on a nondelegable basis and by a vote of not fewer than 
        \2/3\ of the voting members then serving, including an 
        affirmative vote by the Chairperson, that--
                  (A) material financial distress related to, 
                or the nature, scope, size, scale, 
                concentration, interconnectedness, or mix of, 
                the financial activities conducted directly or 
                indirectly by a company incorporated or 
                organized under the laws of the United States 
                or any State or the financial activities in the 
                United States of a company incorporated or 
                organized in a country other than the United 
                States would pose a threat to the financial 
                stability of the United States, based on 
                consideration of the factors in subsection 
                (a)(2) or (b)(2), as applicable;
                  (B) the company is organized or operates in 
                such a manner as to evade the application of 
                this title; and
                  (C) such financial activities of the company 
                shall be supervised by the Board of Governors 
                and subject to prudential standards in 
                accordance with this title, consistent with 
                paragraph (3).
          (2) Report.--Upon making a determination under 
        paragraph (1), the Council shall submit a report to the 
        appropriate committees of Congress detailing the 
        reasons for making such determination.
          (3) Consolidated supervision of only financial 
        activities; establishment of an intermediate holding 
        company.--
                  (A) Establishment of an intermediate holding 
                company.--Upon a determination under paragraph 
                (1), the company that is the subject of the 
                determination may establish an intermediate 
                holding company in which the financial 
                activities of such company and its subsidiaries 
                shall be conducted (other than the activities 
                described in section 167(b)(2)) in compliance 
                with any regulations or guidance provided by 
                the Board of Governors. Such intermediate 
                holding company shall be subject to the 
                supervision of the Board of Governors and to 
                prudential standards under this title as if the 
                intermediate holding company were a nonbank 
                financial company supervised by the Board of 
                Governors.
                  (B) Action of the board of governors.--To 
                facilitate the supervision of the financial 
                activities subject to the determination in 
                paragraph (1), the Board of Governors may 
                require a company to establish an intermediate 
                holding company, as provided for in section 
                167, which would be subject to the supervision 
                of the Board of Governors and to prudential 
                standards under this title, as if the 
                intermediate holding company were a nonbank 
                financial company supervised by the Board of 
                Governors.
          (4) Notice and opportunity for hearing and final 
        determination; judicial review.--Subsections (d) 
        through (h) shall apply to determinations made by the 
        Council pursuant to paragraph (1) in the same manner as 
        such subsections apply to nonbank financial companies.
          (5) Covered financial activities.--For purposes of 
        this subsection, the term ``financial activities''--
                  (A) means activities that are financial in 
                nature (as defined in section 4(k) of the Bank 
                Holding Company Act of 1956);
                  (B) includes the ownership or control of one 
                or more insured depository institutions; and
                  (C) does not include internal financial 
                activities conducted for the company or any 
                affiliate thereof, including internal treasury, 
                investment, and employee benefit functions.
          (6) Only financial activities subject to prudential 
        supervision.--Nonfinancial activities of the company 
        shall not be subject to supervision by the Board of 
        Governors and prudential standards of the Board. For 
        purposes of this Act, the financial activities that are 
        the subject of the determination in paragraph (1) shall 
        be subject to the same requirements as a nonbank 
        financial company supervised by the Board of Governors. 
        Nothing in this paragraph shall prohibit or limit the 
        authority of the Board of Governors to apply prudential 
        standards under this title to the financial activities 
        that are subject to the determination in paragraph (1).
  [(d) Reevaluation and Rescission.--The Council shall--
          [(1) not less frequently than annually, reevaluate 
        each determination made under subsections (a) and (b) 
        with respect to such nonbank financial company 
        supervised by the Board of Governors; and
          [(2) rescind any such determination, if the Council, 
        by a vote of not fewer than \2/3\ of the voting members 
        then serving, including an affirmative vote by the 
        Chairperson, determines that the nonbank financial 
        company no longer meets the standards under subsection 
        (a) or (b), as applicable.
  [(e) Notice and Opportunity for Hearing and Final 
Determination.--
          [(1) In general.--The Council shall provide to a 
        nonbank financial company written notice of a proposed 
        determination of the Council, including an explanation 
        of the basis of the proposed determination of the 
        Council, that a nonbank financial company shall be 
        supervised by the Board of Governors and shall be 
        subject to prudential standards in accordance with this 
        title.
          [(2) Hearing.--Not later than 30 days after the date 
        of receipt of any notice of a proposed determination 
        under paragraph (1), the nonbank financial company may 
        request, in writing, an opportunity for a written or 
        oral hearing before the Council to contest the proposed 
        determination. Upon receipt of a timely 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 company may appear, personally or through counsel, 
        to submit written materials (or, at the sole discretion 
        of the Council, oral testimony and oral argument).
          [(3) Final determination.--Not later than 60 days 
        after the date of a hearing under paragraph (2), the 
        Council shall notify the nonbank financial company of 
        the final determination of the Council, which shall 
        contain a statement of the basis for the decision of 
        the Council.
          [(4) No hearing requested.--If a nonbank financial 
        company does not make a timely request for a hearing, 
        the Council shall notify the nonbank financial company, 
        in writing, of the final determination of the Council 
        under subsection (a) or (b), as applicable, not later 
        than 10 days after the date by which the company may 
        request a hearing under paragraph (2).]
  (d) Reevaluation and Rescission.--
          (1) Annual reevaluation.--Not less frequently than 
        annually, the Council shall reevaluate each 
        determination made under subsections (a) and (b) with 
        respect to a nonbank financial company supervised by 
        the Board of Governors and shall--
                  (A) provide written notice to the nonbank 
                financial company being reevaluated and afford 
                such company an opportunity to submit written 
                materials, within such time as the Council 
                determines to be appropriate (but which shall 
                be not less than 30 days after the date of 
                receipt by the company of such notice), to 
                contest the determination, including materials 
                concerning whether, in the company's view, 
                material financial distress at the company, or 
                the nature, scope, size, scale, concentration, 
                interconnectedness, or mix of the activities of 
                the company could pose a threat to the 
                financial stability of the United States;
                  (B) provide an opportunity for the nonbank 
                financial company to meet with the Council to 
                present the information described in 
                subparagraph (A); and
                  (C) if the Council does not rescind the 
                determination, provide notice to the nonbank 
                financial company, its primary financial 
                regulatory agency and the primary financial 
                regulatory agency of any of the company's 
                significant subsidiaries of the reasons for the 
                Council's decision, which notice shall address 
                with specificity how the Council assessed the 
                material factors presented by the company under 
                subparagraphs (A) and (B).
          (2) Periodic reevaluation.--
                  (A) Review.--Every 5 years after the date of 
                a final determination with respect to a nonbank 
                financial company under subsection (a) or (b), 
                as applicable, the nonbank financial company 
                may submit a written request to the Council for 
                a reevaluation of such determination. Upon 
                receipt of such a request, the Council shall 
                conduct a reevaluation of such determination 
                and hold a vote on whether to rescind such 
                determination.
                  (B) Procedures.--Upon receipt of a written 
                request under paragraph (A), the Council shall 
                fix a time (not earlier than 30 days after the 
                date of receipt of the request) and place at 
                which such company may appear, personally or 
                through counsel, to--
                          (i) submit written materials (which 
                        may include a plan to modify the 
                        company's business, structure, or 
                        operations, which shall specify the 
                        length of the implementation period); 
                        and
                          (ii) provide oral testimony and oral 
                        argument before the members of the 
                        Council.
                  (C) Treatment of plan.--If the company 
                submits a plan in accordance with subparagraph 
                (B)(i), the Council shall consider whether the 
                plan, if implemented, would cause the company 
                to no longer meet the standards for a final 
                determination under subsection (a) or (b), as 
                applicable. The Council shall provide the 
                nonbank financial company an opportunity to 
                revise the plan after consultation with the 
                Council.
                  (D) Explanation for certain companies.--With 
                respect to a reevaluation under this paragraph 
                where the determination being reevaluated was 
                made before the date of enactment of this 
                paragraph, the nonbank financial company may 
                require the Council, as part of such 
                reevaluation, to explain with specificity the 
                basis for such determination.
          (3) Rescission of determination.--
                  (A) In general.--If the Council, by a vote of 
                not fewer than \2/3\ of the voting members then 
                serving, including an affirmative vote by the 
                Chairperson, determines under this subsection 
                that a nonbank financial company no longer 
                meets the standards for a final determination 
                under subsection (a) or (b), as applicable, the 
                Council shall rescind such determination.
                  (B) Approval of company plan.--Approval by 
                the Council of a plan submitted or revised in 
                accordance with paragraph (2) shall require a 
                vote of not fewer than \2/3\ of the voting 
                members then serving, including an affirmative 
                vote by the Chairperson. If such plan is 
                approved by the Council, the company shall 
                implement the plan during the period identified 
                in the plan, except that the Council, in its 
                sole discretion and upon request from the 
                company, may grant one or more extensions of 
                the implementation period. After the end of the 
                implementation period, including any extensions 
                granted by the Council, the Council shall 
                proceed to a vote as described under 
                subparagraph (A).
  (e) Requirements for Proposed Determination, Notice and 
Opportunity for Hearing, and Final Determination.--
          (1) Notice of identification for initial evaluation 
        and opportunity for voluntary submission.--Upon 
        identifying a nonbank financial company for 
        comprehensive analysis of the potential for the nonbank 
        company to pose a threat to the financial stability of 
        the United States, the Council shall provide the 
        nonbank financial company with--
                  (A) written notice that explains with 
                specificity the basis for so identifying the 
                company, a copy of which shall be provided to 
                the company's primary financial regulatory 
                agency;
                  (B) an opportunity to submit written 
                materials for consideration by the Council as 
                part of the Council's initial evaluation of the 
                risk profile and characteristics of the 
                company;
                  (C) an opportunity to meet with the Council 
                to discuss the Council's analysis; and
                  (D) a list of the public sources of 
                information being considered by the Council as 
                part of such analysis.
          (2) Requirements before making a proposed 
        determination.--Before making a proposed determination 
        with respect to a nonbank financial company under 
        paragraph (3), the Council shall--
                  (A) by a vote of not fewer than \2/3\ of the 
                voting members then serving, including an 
                affirmative vote by the Chairperson, approve a 
                resolution that identifies with specificity any 
                risks to the financial stability of the United 
                States the Council has identified relating to 
                the nonbank financial company;
                  (B) with respect to nonbank financial company 
                with a primary financial regulatory agency, 
                provide a copy of the resolution described 
                under subparagraph (A) to the primary financial 
                regulatory agency and provide such agency with 
                at least 180 days from the receipt of the 
                resolution to--
                          (i) consider the risks identified in 
                        the resolution; and
                          (ii) provide a written response to 
                        the Council that includes its 
                        assessment of the risks identified and 
                        the degree to which they are or could 
                        be addressed by existing regulation 
                        and, as appropriate, issue proposed 
                        regulations or undertake other 
                        regulatory action to mitigate the 
                        identified risks;
                  (C) provide the nonbank financial company 
                with written notice that the Council--
                          (i) is considering whether to make a 
                        proposed determination with respect to 
                        the nonbank financial company under 
                        subsection (a) or (b), as applicable, 
                        which notice explains with specificity 
                        the basis for the Council's 
                        consideration, including any aspects of 
                        the company's operations or activities 
                        that are a primary focus for the 
                        Council; or
                          (ii) has determined not to subject 
                        the company to further review, which 
                        action shall not preclude the Council 
                        from issuing a notice to the company 
                        under subparagraph (1)(A) at a future 
                        time; and
                  (D) in the case of a notice to the nonbank 
                financial company under subparagraph (C)(i), 
                provide the company with--
                          (i) an opportunity to meet with the 
                        Council to discuss the Council's 
                        analysis;
                          (ii) an opportunity to submit written 
                        materials, within such time as the 
                        Council deems appropriate (but not less 
                        than 30 days after the date of receipt 
                        by the company of the notice described 
                        under clause (i)), to the Council to 
                        inform the Council's consideration of 
                        the nonbank financial company for a 
                        proposed determination, including 
                        materials concerning the company's 
                        views as to whether it satisfies the 
                        standard for determination set forth in 
                        subsection (a) or (b), as applicable;
                          (iii) an explanation of how any 
                        request by the Council for information 
                        from the nonbank financial company 
                        relates to potential risks to the 
                        financial stability of the United 
                        States and the Council's analysis of 
                        the company;
                          (iv) written notice when the Council 
                        deems its evidentiary record regarding 
                        such nonbank financial company to be 
                        complete; and
                          (v) an opportunity to meet with the 
                        members of the Council.
          (3) Proposed determination.--
                  (A) Voting.--The Council may, by a vote of 
                not fewer than \2/3\ of the voting members then 
                serving, including an affirmative vote by the 
                Chairperson, propose to make a determination in 
                accordance with the provisions of subsection 
                (a) or (b), as applicable, with respect to a 
                nonbank financial company.
                  (B) Deadline for making a proposed 
                determination.--With respect to a nonbank 
                financial company provided with a written 
                notice under paragraph (2)(C)(i), if the 
                Council does not provide the company with the 
                written notice of a proposed determination 
                described under paragraph (4) within the 180-
                day period following the date on which the 
                Council notifies the company under paragraph 
                (2)(C) that the evidentiary record is complete, 
                the Council may not make such a proposed 
                determination with respect to such company 
                unless the Council repeats the procedures 
                described under paragraph (2).
                  (C) Review of actions of primary financial 
                regulatory agency.--With respect to a nonbank 
                financial company with a primary financial 
                regulatory agency, the Council may not vote 
                under subparagraph (A) to make a proposed 
                determination unless--
                          (i) the Council first determines that 
                        any proposed regulations or other 
                        regulatory actions taken by the primary 
                        financial regulatory agency after 
                        receipt of the resolution described 
                        under paragraph (2)(A) are insufficient 
                        to mitigate the risks identified in the 
                        resolution;
                          (ii) the primary financial regulatory 
                        agency has notified the Council that 
                        the agency has no proposed regulations 
                        or other regulatory actions to mitigate 
                        the risks identified in the resolution; 
                        or
                          (iii) the period allowed by the 
                        Council under paragraph (2)(B) has 
                        elapsed and the primary financial 
                        regulatory agency has taken no action 
                        in response to the resolution.
          (4) Notice of proposed determination.--The Council 
        shall--
                  (A) provide to a nonbank financial company 
                written notice of a proposed determination of 
                the Council, including an explanation of the 
                basis of the proposed determination of the 
                Council, that a nonbank financial company shall 
                be supervised by the Board of Governors and 
                shall be subject to prudential standards in 
                accordance with this title, an explanation of 
                the specific risks to the financial stability 
                of the United States presented by the nonbank 
                financial company, and a detailed explanation 
                of why existing regulations or other regulatory 
                action by the company's primary financial 
                regulatory agency, if any, is insufficient to 
                mitigate such risk; and
                  (B) provide the primary financial regulatory 
                agency of the nonbank financial company a copy 
                of the nonpublic written explanation of the 
                Council's proposed determination.
          (5) Hearing.--
                  (A) In general.--Not later than 30 days after 
                the date of receipt of any notice of a proposed 
                determination under paragraph (4), the nonbank 
                financial company may request, in writing, an 
                opportunity for a written or oral hearing 
                before the Council to contest the proposed 
                determination, including the opportunity to 
                present a plan to modify the company's 
                business, structure, or operations in order to 
                mitigate the risks identified in the notice, 
                and which plan shall also include any steps the 
                company expects to take during the 
                implementation period to mitigate such risks.
                  (B) Grant of hearing.--Upon receipt of a 
                timely request, the Council shall fix a time 
                (not earlier than 30 days after the date of 
                receipt of the request) and place at which such 
                company may appear, personally or through 
                counsel, to--
                          (i) submit written materials (which 
                        may include a plan to modify the 
                        company's business, structure, or 
                        operations); or
                          (ii) provide oral testimony and oral 
                        argument to the members of the Council.
          (6) Council consideration of company plan.--
                  (A) In general.--If a nonbank financial 
                company submits a plan in accordance with 
                paragraph (5), the Council shall, prior to 
                making a final determination--
                          (i) consider whether the plan, if 
                        implemented, would mitigate the risks 
                        identified in the notice under 
                        paragraph (4); and
                          (ii) provide the nonbank financial 
                        company an opportunity to revise the 
                        plan after consultation with the 
                        Council.
                  (B) Voting.--Approval by the Council of a 
                plan submitted under paragraph (5) or revised 
                under subparagraph (A)(ii) shall require a vote 
                of not fewer than \2/3\ of the voting members 
                then serving, including an affirmative vote by 
                the Chairperson.
                  (C) Implementation of approved plan.--With 
                respect to a nonbank financial company's plan 
                approved by the Council under subparagraph (B), 
                the company shall have one year to implement 
                the plan, except that the Council, in its sole 
                discretion and upon request from the nonbank 
                financial company, may grant one or more 
                extensions of the implementation period.
                  (D) Oversight of implementation.--
                          (i) Periodic reports.--The Council, 
                        acting through the Office of Financial 
                        Research, may require the submission of 
                        periodic reports from a nonbank 
                        financial company for the purpose of 
                        evaluating the company's progress in 
                        implementing a plan approved by the 
                        Council under subparagraph (B).
                          (ii) Inspections.--The Council may 
                        direct the primary financial regulatory 
                        agency of a nonbank financial company 
                        or its subsidiaries (or, if none, the 
                        Board of Governors) to inspect the 
                        company or its subsidiaries for the 
                        purpose of evaluating the 
                        implementation of the company's plan.
                  (E) Authority to rescind approval.--
                          (i) In general.--During the 
                        implementation period described under 
                        subparagraph (C), including any 
                        extensions granted by the Council, the 
                        Council shall retain the authority to 
                        rescind its approval of the plan if the 
                        Council finds, by a vote of not fewer 
                        than \2/3\ of the voting members then 
                        serving, including an affirmative vote 
                        by the Chairperson, that the company's 
                        implementation of the plan is no longer 
                        sufficient to mitigate or prevent the 
                        risks identified in the resolution 
                        described under paragraph (2)(A).
                          (ii) Final determination vote.--The 
                        Council may proceed to a vote on final 
                        determination under subsection (a) or 
                        (b), as applicable, not earlier than 10 
                        days after providing the nonbank 
                        financial company with written notice 
                        that the Council has rescinded the 
                        approval of the company's plan pursuant 
                        to clause (i).
                  (F) Actions after implementation.--
                          (i) Evaluation of implementation.--
                        After the end of the implementation 
                        period described under subparagraph 
                        (C), including any extensions granted 
                        by the Council, the Council shall 
                        consider whether the plan, as 
                        implemented by the nonbank financial 
                        company, adequately mitigates or 
                        prevents the risks identified in the 
                        resolution described under paragraph 
                        (2)(A).
                          (ii) Voting.--If, after performing an 
                        evaluation under clause (i), not fewer 
                        than \2/3\ of the voting members of the 
                        Council then serving, including an 
                        affirmative vote by the Chairperson, 
                        determine that the plan, as 
                        implemented, adequately mitigates or 
                        prevents the identified risks, the 
                        Council shall not make a final 
                        determination under subsection (a) or 
                        (b), as applicable, with respect to the 
                        nonbank financial company and shall 
                        notify the company of the Council's 
                        decision to take no further action.
          (7) Final council decisions.--
                  (A) In general.--Not later than 90 days after 
                the date of a hearing under paragraph (5), the 
                Council shall notify the nonbank financial 
                company of--
                          (i) a final determination under 
                        subsection (a) or (b), as applicable;
                          (ii) the Council's approval of a plan 
                        submitted by the nonbank financial 
                        company under paragraph (5) or revised 
                        under paragraph (6); or
                          (iii) the Council's decision to take 
                        no further action with respect to the 
                        nonbank financial company.
                  (B) Explanatory statement.--A final 
                determination of the Council, under subsection 
                (a) or (b), shall contain a statement of the 
                basis for the decision of the Council, 
                including the reasons why the Council rejected 
                any plan by the nonbank financial company 
                submitted under paragraph (5) or revised under 
                paragraph (6).
                  (C) Notice to primary financial regulatory 
                agency.--In the case of a final determination 
                under subsection (a) or (b), the Council shall 
                provide the primary financial regulatory agency 
                of the nonbank financial company a copy of the 
                nonpublic written explanation of the Council's 
                final determination.
  (f) Emergency Exception.--
          (1) In general.--The Council may waive or modify the 
        requirements of subsection (e) with respect to a 
        nonbank financial company, if the Council determines, 
        by a vote of not fewer than \2/3\ of the voting members 
        then serving, including an affirmative vote by the 
        Chairperson, that such waiver or modification is 
        necessary or appropriate to prevent or mitigate threats 
        posed by the nonbank financial company to the financial 
        stability of the United States.
          (2) Notice.--The Council shall provide notice of a 
        waiver or modification under this subsection to the 
        nonbank financial company concerned as soon as 
        practicable, but not later than 24 hours after the 
        waiver or modification is granted.
          (3) International coordination.--In making a 
        determination under paragraph (1), the Council shall 
        consult with the appropriate home country supervisor, 
        if any, of the foreign nonbank financial company that 
        is being considered for such a determination.
          (4) Opportunity for hearing.--The Council shall allow 
        a nonbank financial company to request, in writing, an 
        opportunity for a written or oral hearing before the 
        Council to contest a waiver or modification under this 
        subsection, not later than 10 days after the date of 
        receipt of notice of the waiver or modification by the 
        company. Upon receipt of a timely request, the Council 
        shall fix a time (not later than 15 days after the date 
        of receipt of the request) and place at which the 
        nonbank financial company may appear, personally or 
        through counsel, to submit written materials (or, at 
        the sole discretion of the Council, oral testimony and 
        oral argument).
          (5) Notice of final determination.--Not later than 30 
        days after the date of any hearing under paragraph (4), 
        the Council shall notify the subject nonbank financial 
        company of the final determination of the Council under 
        this subsection, which shall contain a statement of the 
        basis for the decision of the Council.
  (g) Consultation.--The Council shall consult with the primary 
financial regulatory agency, if any, for each nonbank financial 
company or subsidiary of a nonbank financial company that is 
being considered for supervision by the Board of Governors 
under this section [before the Council makes any final 
determination] from the outset of the Council's consideration 
of the company, including before the Council makes any proposed 
or final determination with respect to such nonbank financial 
company under subsection (a), (b), or (c).
  (h) Judicial Review.--If the Council makes a final 
determination under this section with respect to a nonbank 
financial company, such nonbank financial company may, not 
later than 30 days after the date of receipt of the notice of 
final determination under subsection (d)(2), (e)(3), or (f)(5), 
bring an action in the United States district court for the 
judicial district in which the home office of such nonbank 
financial company is located, or in the United States District 
Court for the District of Columbia, for an order requiring that 
the final determination be rescinded, and the court shall, upon 
review, dismiss such action or direct the final determination 
to be rescinded. Review of such an action shall be limited to 
whether the final determination made under this section was 
arbitrary and capricious.
  (i) International Coordination.--In exercising its duties 
under this title with respect to foreign nonbank financial 
companies, foreign-based bank holding companies, and cross-
border activities and markets, the Council shall consult with 
appropriate foreign regulatory authorities, to the extent 
appropriate.
  (j) Public Disclosure Requirement.--The Council shall--
          (1) in each case where a nonbank financial company 
        has been notified that it is subject to the Council's 
        review and the company has publicly disclosed such 
        fact, confirm that the nonbank financial company is 
        subject to the Council's review, in response to a 
        request from a third party;
          (2) upon making a final determination, publicly 
        provide a written explanation of the basis for its 
        decision with sufficient detail to provide the public 
        with an understanding of the specific bases of the 
        Council's determination, including any assumptions 
        related thereof, subject to the requirements of section 
        112(d)(5);
          (3) include, in the annual report required by section 
        112, the number of nonbank financial companies from the 
        previous year subject to preliminary analysis, further 
        review, and subject to a proposed or final 
        determination; and
          (4) within 90 days after the enactment of this 
        subsection, publish information regarding its 
        methodology for calculating any quantitative thresholds 
        or other metrics used to identify nonbank financial 
        companies for analysis by the Council.
  (k) Periodic Assessment of the Impact of Designations.--
          (1) Assessment.--Every five years after the date of 
        enactment of this section, the Council shall--
                  (A) conduct a study of the Council's 
                determinations that nonbank financial companies 
                shall be supervised by the Board of Governors 
                and shall be subject to prudential standards; 
                and
                  (B) comprehensively assess the impact of such 
                determinations on the companies for which such 
                determinations were made and the wider economy, 
                including whether such determinations are 
                having the intended result of improving the 
                financial stability of the United States.
          (2) Report.--Not later than 90 days after completing 
        a study required under paragraph (1), the Council shall 
        issue a report to the Congress that--
                  (A) describes all findings and conclusions 
                made by the Council in carrying out such study; 
                and
                  (B) identifies whether any of the Council's 
                determinations should be rescinded or whether 
                related regulations or regulatory guidance 
                should be modified, streamlined, expanded, or 
                repealed.

                             MINORITY VIEWS

    H.R. 1550 represents yet another attempt to prevent the 
Financial Stability Oversight Council (the Council) from doing 
its congressionally-mandated job of preventing another 
financial crisis by bogging it and its designation process down 
in endless analysis and litigation. The Council is a regulatory 
body created in the Dodd-Frank Wall Street Reform and Consumer 
Protection Act for the purpose of identifying and responding to 
risks to financial stability, as well as, eliminating 
expectations the government will shield market participants 
from losses. Congress specifically directed the Council to 
determine whether a U.S. nonbank financial company should be 
supervised by the Federal Reserve and subject to enhanced 
prudential standards if the Council concludes that financial 
distress at or the activities of the company would pose a 
threat to U.S. financial stability.
    While the Dodd-Frank Act contains guidelines for 
identifying systemically important institutions and activities 
(including the direction that the Council consider risks like 
leverage, off-balance sheet exposures, transactions and 
relationships with other financial companies, the impact of the 
company as a creditor, assets and liabilities, current 
regulation and supervision, and the company's financial 
activities), Congress provided the Council with broad 
discretion in designating an institution, but required certain 
steps to ensure transparency and due process. For example, 
after making a proposed designation, the Council submits a 
report to the House Financial Services and Senate Banking 
Committees detailing the reasons for making its designation and 
provide notice and an explanation to the nonbank financial 
company. The company is given 30 days after receipt of the 
notice to contest FSOC's determination and an additional 30 
days after a final determination to appeal the determination in 
U.S. courts.
    Pursuant to the Dodd-Frank Act, the Council established a 
three-stage process for the designation of nonbank financial 
companies. Earlier this year following months of evaluation and 
engagement with financial companies, trade associations, 
nonbank financial companies subject to previous Council 
determinations, public interest groups, and Congressional 
stakeholders, the Council adopted 17 changes and Supplemental 
Procedures designed to promote transparency related to the 
evaluation of nonbank financial companies. Generally, these 
changes include: informing companies earlier in the process 
that they are under review; providing the company with 
additional opportunities to engage with and present information 
to the Council, its staff and their regulator; and making more 
information about Council designations public.
    H.R. 1550, however, goes further merely codifying the 
Council's changes, and instead more than doubles time it would 
take for the Council to designate a company like American 
International Group or AIG. Department of the Treasury 
Secretary Jack Lew, the Chair of the Council, explained to the 
Committee, ``A misleading case has been made that the Council 
has overstepped in its effort to protect the financial system. 
But in the five years since the Council was established, it has 
identified only four nonbank financial companies whose material 
financial distress could pose a threat to U.S. financial 
stability.'' H.R. 1550 would take an already lengthy and 
deliberative two-year process to more than four years. Such 
delays would allow companies to avoid prudential measures 
intended to mitigate threats to our economy for the benefit of 
their own shareholders. Rather than merely codify the changes 
made earlier this year, H.R. 1550 seeks to by statute provide 
institutions that the markets likely conclude are ``too-big-to-
fail'' with a roadmap to challenge the Council's, as one 
witness described, ``indefinitely.''
    For these reasons, we oppose this bill.

                                   Maxine Waters.
                                   Wm. Lacy Clay.
                                   Ruben Hinojosa.
                                   Keith Ellison.
                                   Al Green.