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115th Congress    }                                 {         Report
                        HOUSE OF REPRESENTATIVES
 2d Session       }                                 {         115-543
======================================================================



 
             SMALL BANK HOLDING COMPANY RELIEF ACT OF 2018

                                _______
                                

February 2, 2018.--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. 4771]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 4771) to raise the consolidated assets threshold 
under the small bank holding company policy statement, and for 
other purposes, having considered the same, report favorably 
thereon without amendment and recommend that the bill do pass.

                          Purpose and Summary

    Introduced by Representative Mia Love on January 11, 2018, 
H.R. 4771, the ``Small Bank Holding Company Relief Act of 
2018'' requires the Board of Governors of the Federal Reserve 
System (Federal Reserve) within six months of the date of 
enactment, to revise its ``Small Bank Holding Company Policy 
Statement on Assessment of Financial and Managerial Factors'' 
(``Policy Statement''). The legislation requires the Federal 
Reserve to raise the consolidated asset threshold at which the 
Policy Statement applies from $1 billion to $3 billion.

                  Background and Need for Legislation

    To ensure that bank holding companies (``BHCs'') are able 
to serve as a source of strength for their insured depository 
subsidiaries, the Board of Governors of the Federal Reserve 
System (Federal Reserve) subjects them to consolidated, risk-
based and leverage capital adequacy guidelines. As part of 
these guidelines, the Federal Reserve generally discourages the 
use of debt by BHCs to finance the acquisition of banks or 
other companies; however, the Federal Reserve acknowledges that 
the transfer of ownership of small banks to small bank holding 
companies often requires the use of acquisition debt. 
Accordingly, in 1980, the Federal Reserve created an exemption 
for qualifying small bank holding companies (``SBHCs'') from 
the BHC capital guidelines--the Small Bank Holding Company 
Policy Statement (``Policy Statement'').\1\
---------------------------------------------------------------------------
    \1\12 C.F.R. part 225--appendix C.
---------------------------------------------------------------------------
    The Policy Statement permits the formation and expansion of 
SBHCs with debt levels that are higher than what would be 
permitted for larger BHCs. The original Policy Statement issued 
in 1980 set the qualifying asset threshold at $150 million. In 
2006, the Federal Reserve increased this threshold to $500 
million. On April 9, 2015, the Federal Reserve issued a final 
rule to implement P.L. 113-250, which required the Federal 
Reserve Board to raise the Policy Statement threshold to $1 
billion.
    In addition to mandatory consolidated assets of less than 
$1 billion, a BHC that seeks to qualify as an SBHC must not:
          (1) Be engaged in significant nonbanking activities;
          (2) Conduct significant off-balance sheet activities 
        (including securitization); or
          (3) Have a material amount of debt or equity 
        securities outstanding (other than trust preferred 
        securities) that are registered with the Securities and 
        Exchange Commission.
    The Federal Reserve may, in its discretion, exclude any 
BHC, regardless of asset size, from the Policy Statement if 
such action is warranted for supervisory purposes.
    H.R. 4771 allows those BHCs that qualify as SBHCs under the 
Policy Statement to be exempt from the Federal Reserve's risk-
based capital and leverage rules. In addition, an SBHC may use 
debt to finance up to 75 percent of the purchase price of an 
acquisition, subject to ongoing requirements and restrictions. 
These restrictions include (1) not paying dividends if their 
debt-to-equity ratio exceeds 1:1; and (2) retiring all debt 
within 25 years and reducing debt to 30 percent or less of 
equity within 12 years of incurring the debt, to ensure that 
the higher leverage does not pose an undue burden on subsidiary 
depository institutions; (3) ensuring each depository 
institution subsidiary remain well-capitalized.
    On average the United States loses more than one community 
financial institution every day because of the sheer weight, 
volume, cost, complexity and uncertainty of federal regulation. 
As they die, unfortunately, so do the home ownership dreams of 
millions of consumers and taxpayers who want and need the 
customized services community banks and credit unions provide 
as they seek financial independence. The U.S. financial 
regulatory system should promote economic growth that not only 
prevents financial crises but also minimizes regulations that 
increase costs without corresponding benefits.
    H.R. 4771 is a targeted and focused bill that will make it 
easier for community banks to raise additional capital by 
issuing debt, providing sensible regulatory relief to small 
financial institutions while also preserving safety and 
soundness measures. H.R. 4771 makes it easier for community 
banks subject to the Policy Statement to form new holding 
companies, fund existing holding companies, and make 
acquisitions by issuing debt at the holding company level.
    Small bank and thrift holding companies face unique 
challenges with regard to capital formation, which is a 
particular concern at a time when the federal financial 
regulators are demanding higher capital levels in response to 
the Basel III capital accords. The environment in which these 
financial institutions operate has become more difficult in the 
past few years, with massive increases in regulatory burdens 
and capital requirements on top of industry consolidation and 
impediments to asset growth. H.R. 4771 would ease some of this 
burden and simply make it easier for institutions subject to 
the Policy Statement to form new holding companies, fund 
existing holding companies and make acquisitions by issuing 
debt at the holding company level. These are all important 
tools to ensure that our smallest financial institutions 
continue to lend to their communities, hire new loan officers 
and staff, and survive in what remains a very difficult 
environment for community banks.

                                Hearings

    The Committee on Financial Services held a hearing 
examining matters relating to H.R. 4771 on April 26, 2017 and 
April 28, 2017.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
January 18, 2018, and ordered H.R. 4771 to be reported 
favorably to the House by a recorded vote of 41 yeas to 14 nays 
(Record vote no. FC-144), 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 with amendment. The 
motion was agreed to by a recorded vote of 41 yeas to 14 nays 
(Record vote no. FC-144), 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. 4771 
will promote the formation and expansion of small bank holding 
companies by raising the consolidated assets threshold under 
the Small Bank Holding Company Policy Statement from $1 billion 
to $3 billion.

   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.

                 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, January 31, 2018.
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. 4771, the Small 
Bank Holding Company Relief Act of 2018.
    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,
                                                          Director.
    Enclosure.

H.R. 4771--Small Bank Holding Company Relief Act of 2018

    H.R. 4771 would require the Federal Reserve to change its 
policy statement on the allowable level of debt at certain 
small bank holding companies. The current policy statement 
applies to bank holding companies with less than $1 billion in 
total consolidated assets. Under the bill, it would apply to 
bank holding companies with less than $3 billion in such 
assets.
    Generally, banks with higher levels of debt have a higher 
probability of failing. The failure of such an institution is 
likely to increase direct spending by the Federal Deposit 
Insurance Corporation (FDIC). However, the Federal Reserve may 
choose not to apply the policy statement to any bank holding 
company, regardless of asset size, if it determines that such 
an action is necessary. CBO expects that the Federal Reserve 
would not allow bank holding companies to take on additional 
debt under this policy if that debt would jeopardize the 
solvency of the bank holding company and significantly increase 
the probability of failure. Further, because the Federal 
Reserve already supervises those companies, CBO expects that 
any changes to its administrative costs under the bill would be 
insignificant. Because increased administrative costs to the 
Federal Reserve would lower remittances to the Treasury, those 
costs are recorded in the budget as a decrease in revenues.
    Because enacting H.R. 4771 could affect direct spending and 
revenues, pay-as-you-go procedures apply. However, CBO 
estimates that any effects would be insignificant for each 
year.
    CBO estimates that enacting H.R. 4771 would not 
significantly increase net direct spending or on-budget 
deficits in any of the four consecutive 10-year periods 
beginning in 2028.
    H.R. 4771 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act.
    The CBO staff contacts for this estimate are Sarah Puro 
(for the FDIC) and Nathaniel Frentz (for the Federal Reserve). 
The estimate was approved by H. Samuel Papenfuss, Deputy 
Assistant Director for Budget Analysis.

                       Federal Mandates Statement

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995.
    The Committee has determined that the bill does not contain 
Federal mandates on the private sector. The Committee has 
determined that the bill does not impose a Federal 
intergovernmental mandate on State, local, or tribal 
governments.

                      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

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the bill and states that the provisions of 
the bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

                    Duplication of Federal Programs

    In compliance with clause 3(c)(5) of rule XIII of the Rules 
of the House of Representatives, the Committee states that no 
provision of the bill establishes or reauthorizes: (1) a 
program of the Federal Government known to be duplicative of 
another Federal program; (2) a program included in any report 
from the Government Accountability Office to Congress pursuant 
to section 21 of Public Law 111-139; or (3) a program related 
to a program identified in the most recent Catalog of Federal 
Domestic Assistance, published pursuant to the Federal Program 
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No. 
98-169).

                   Disclosure of Directed Rulemaking

    Pursuant to section 3(i) of H. Res. 5, (115th Congress), 
the following statement is made concerning directed 
rulemakings: The Committee states that the bill requires no 
directed rulemakings.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    This section cites H.R. 4771 as the ``Small Bank Holding 
Company Relief Act of 2018.''

Section 2. Changes required to Small Bank Holding Company Policy 
        Statement on Assessment of Financial and Managerial Factors

    This section requires the Federal Reserve Board, within six 
months of date of enactment, to revise the Small Bank Holding 
Company Policy Statement on Assessment of Financial and 
Managerial Factors (12 C.F.R. part 225--appendix C) to raise 
the consolidated asset threshold under such policy statement 
from $1,000,000,000 to $3,000,000,000.
    This section also includes conforming amendments clarifying 
the exemption granted under the Small Bank Holding Company 
Policy Statement on Assessment of Financial and Managerial 
Factors from minimum leverage and risk-based capital 
requirements.

         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):

         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):

DODD-FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT

           *       *       *       *       *       *       *



TITLE I--FINANCIAL STABILITY

           *       *       *       *       *       *       *


Subtitle C--Additional Board of Governors Authority for Certain Nonbank 
Financial Companies and Bank Holding Companies

           *       *       *       *       *       *       *


SEC. 171. LEVERAGE AND RISK-BASED CAPITAL REQUIREMENTS.

  (a) Definitions.--For purposes of this section, the following 
definitions shall apply:
          (1) Generally applicable leverage capital 
        requirements.--The term ``generally applicable leverage 
        capital requirements'' means--
                  (A) the minimum ratios of tier 1 capital to 
                average total assets, as established by the 
                appropriate Federal banking agencies to apply 
                to insured depository institutions under the 
                prompt corrective action regulations 
                implementing section 38 of the Federal Deposit 
                Insurance Act, regardless of total consolidated 
                asset size or foreign financial exposure; and
                  (B) includes the regulatory capital 
                components in the numerator of that capital 
                requirement, average total assets in the 
                denominator of that capital requirement, and 
                the required ratio of the numerator to the 
                denominator.
          (2) Generally applicable risk-based capital 
        requirements.--The term ``generally applicable risk-
        based capital requirements'' means--
                  (A) the risk-based capital requirements, as 
                established by the appropriate Federal banking 
                agencies to apply to insured depository 
                institutions under the prompt corrective action 
                regulations implementing section 38 of the 
                Federal Deposit Insurance Act, regardless of 
                total consolidated asset size or foreign 
                financial exposure; and
                  (B) includes the regulatory capital 
                components in the numerator of those capital 
                requirements, the risk-weighted assets in the 
                denominator of those capital requirements, and 
                the required ratio of the numerator to the 
                denominator.
          (3) Definition of depository institution holding 
        company.--The term ``depository institution holding 
        company'' means a bank holding company or a savings and 
        loan holding company (as those terms are defined in 
        section 3 of the Federal Deposit Insurance Act) that is 
        organized in the United States, including any bank or 
        savings and loan holding company that is owned or 
        controlled by a foreign organization, but does not 
        include the foreign organization.
          (4) Business of insurance.--The term ``business of 
        insurance'' has the same meaning as in section 1002(3).
          (5) Person regulated by a state insurance 
        regulator.--The term ``person regulated by a State 
        insurance regulator'' has the same meaning as in 
        section 1002(22).
          (6) Regulated foreign subsidiary and regulated 
        foreign affiliate.--The terms ``regulated foreign 
        subsidiary'' and ``regulated foreign affiliate'' mean a 
        person engaged in the business of insurance in a 
        foreign country that is regulated by a foreign 
        insurance regulatory authority that is a member of the 
        International Association of Insurance Supervisors or 
        other comparable foreign insurance regulatory authority 
        as determined by the Board of Governors following 
        consultation with the State insurance regulators, 
        including the lead State insurance commissioner (or 
        similar State official) of the insurance holding 
        company system as determined by the procedures within 
        the Financial Analysis Handbook adopted by the National 
        Association of Insurance Commissioners, where the 
        person, or its principal United States insurance 
        affiliate, has its principal place of business or is 
        domiciled, but only to the extent that--
                  (A) such person acts in its capacity as a 
                regulated insurance entity; and
                  (B) the Board of Governors does not determine 
                that the capital requirements in a specific 
                foreign jurisdiction are inadequate.
          (7) Capacity as a regulated insurance entity.--The 
        term ``capacity as a regulated insurance entity''--
                  (A) includes any action or activity 
                undertaken by a person regulated by a State 
                insurance regulator or a regulated foreign 
                subsidiary or regulated foreign affiliate of 
                such person, as those actions relate to the 
                provision of insurance, or other activities 
                necessary to engage in the business of 
                insurance; and
                  (B) does not include any action or activity, 
                including any financial activity, that is not 
                regulated by a State insurance regulator or a 
                foreign agency or authority and subject to 
                State insurance capital requirements or, in the 
                case of a regulated foreign subsidiary or 
                regulated foreign affiliate, capital 
                requirements imposed by a foreign insurance 
                regulatory authority.
  (b) Minimum Capital Requirements.--
          (1) Minimum leverage capital requirements.--The 
        appropriate Federal banking agencies shall establish 
        minimum leverage capital requirements on a consolidated 
        basis for insured depository institutions, depository 
        institution holding companies, and nonbank financial 
        companies supervised by the Board of Governors. The 
        minimum leverage capital requirements established under 
        this paragraph shall not be less than the generally 
        applicable leverage capital requirements, which shall 
        serve as a floor for any capital requirements that the 
        agency may require, nor quantitatively lower than the 
        generally applicable leverage capital requirements that 
        were in effect for insured depository institutions as 
        of the date of enactment of this Act.
          (2) Minimum risk-based capital requirements.--The 
        appropriate Federal banking agencies shall establish 
        minimum risk-based capital requirements on a 
        consolidated basis for insured depository institutions, 
        depository institution holding companies, and nonbank 
        financial companies supervised by the Board of 
        Governors. The minimum risk-based capital requirements 
        established under this paragraph shall not be less than 
        the generally applicable risk-based capital 
        requirements, which shall serve as a floor for any 
        capital requirements that the agency may require, nor 
        quantitatively lower than the generally applicable 
        risk-based capital requirements that were in effect for 
        insured depository institutions as of the date of 
        enactment of this Act.
          (3) Investments in financial subsidiaries.--For 
        purposes of this section, investments in financial 
        subsidiaries that insured depository institutions are 
        required to deduct from regulatory capital under 
        section 5136A of the Revised Statutes of the United 
        States or section 46(a)(2) of the Federal Deposit 
        Insurance Act need not be deducted from regulatory 
        capital by depository institution holding companies or 
        nonbank financial companies supervised by the Board of 
        Governors, unless such capital deduction is required by 
        the Board of Governors or the primary financial 
        regulatory agency in the case of nonbank financial 
        companies supervised by the Board of Governors.
          (4) Effective dates and phase-in periods.--
                  (A) Debt or equity instruments on or after 
                may 19, 2010.--For debt or equity instruments 
                issued on or after May 19, 2010, by depository 
                institution holding companies or by nonbank 
                financial companies supervised by the Board of 
                Governors, this section shall be deemed to have 
                become effective as of May 19, 2010.
                  (B) Debt or equity instruments issued before 
                may 19, 2010.--For debt or equity instruments 
                issued before May 19, 2010, by depository 
                institution holding companies or by nonbank 
                financial companies supervised by the Board of 
                Governors, any regulatory capital deductions 
                required under this section shall be phased in 
                incrementally over a period of 3 years, with 
                the phase-in period to begin on January 1, 
                2013, except as set forth in subparagraph (C).
                  (C) Debt or equity instruments of smaller 
                institutions.--For debt or equity instruments 
                issued before May 19, 2010, by depository 
                institution holding companies with total 
                consolidated assets of less than 
                $15,000,000,000 as of December 31, 2009, or 
                March 31, 2010, and by organizations that were 
                mutual holding companies on May 19, 2010, the 
                capital deductions that would be required for 
                other institutions under this section are not 
                required as a result of this section.
                  (D) Depository institution holding companies 
                not previously supervised by the board of 
                governors.--For any depository institution 
                holding company that was not supervised by the 
                Board of Governors as of May 19, 2010, the 
                requirements of this section, except as set 
                forth in subparagraphs (A) and (B), shall be 
                effective 5 years after the date of enactment 
                of this Act
                  (E) Certain bank holding company subsidiaries 
                of foreign banking organizations.--For bank 
                holding company subsidiaries of foreign banking 
                organizations that have relied on Supervision 
                and Regulation Letter SR-01-1 issued by the 
                Board of Governors (as in effect on May 19, 
                2010), the requirements of this section, except 
                as set forth in subparagraph (A), shall be 
                effective 5 years after the date of enactment 
                of this Act.
          (5) Exceptions.--This section shall not apply to--
                  (A) debt or equity instruments issued to the 
                United States or any agency or instrumentality 
                thereof pursuant to the Emergency Economic 
                Stabilization Act of 2008, and prior to October 
                4, 2010;
                  (B) any Federal home loan bank; or
                  [(C) any bank holding company or savings and 
                loan holding company having less than 
                $1,000,000,000 in total consolidated assets 
                that complies with the requirements of the 
                Small Bank Holding Company Policy Statement on 
                Assessment of Financial and Managerial Factors 
                of the Board of Governors (12 CFR part 225 
                appendix C), as the requirements of such Policy 
                Statement are amended pursuant to section 1 of 
                an Act entitled ``To enhance the ability of 
                community financial institutions to foster 
                economic growth and serve their communities, 
                boost small businesses, increase individual 
                savings, and for other purposes''.]
                  (C) any bank holding company or savings and 
                loan holding company that is subject to the 
                application of the Small Bank Holding Company 
                Policy Statement on Assessment of Financial and 
                Managerial Factors of the Board of Governors 
                (12 C.F.R. part 225--appendix C).
          (6) Study and report on small institution access to 
        capital.--
                  (A) Study required.--The Comptroller General 
                of the United States, after consultation with 
                the Federal banking agencies, shall conduct a 
                study of access to capital by smaller insured 
                depository institutions.
                  (B) Scope.--For purposes of this study 
                required by subparagraph (A), the term 
                ``smaller insured depository institution'' 
                means an insured depository institution with 
                total consolidated assets of $5,000,000,000 or 
                less.
                  (C) Report to congress.--Not later than 18 
                months after the date of enactment of this Act, 
                the Comptroller General of the United States 
                shall submit to the Committee on Banking, 
                Housing, and Urban Affairs of the Senate and 
                the Committee on Financial Services of the 
                House of Representatives a report summarizing 
                the results of the study conducted under 
                subparagraph (A), together with any 
                recommendations for legislative or regulatory 
                action that would enhance the access to capital 
                of smaller insured depository institutions, in 
                a manner that is consistent with safe and sound 
                banking operations.
          (7) Capital requirements to address activities that 
        pose risks to the financial system.--
                  (A) In general.--Subject to the 
                recommendations of the Council, in accordance 
                with section 120, the Federal banking agencies 
                shall develop capital requirements applicable 
                to insured depository institutions, depository 
                institution holding companies, and nonbank 
                financial companies supervised by the Board of 
                Governors that address the risks that the 
                activities of such institutions pose, not only 
                to the institution engaging in the activity, 
                but to other public and private stakeholders in 
                the event of adverse performance, disruption, 
                or failure of the institution or the activity.
                  (B) Content.--Such rules shall address, at a 
                minimum, the risks arising from--
                          (i) significant volumes of activity 
                        in derivatives, securitized products 
                        purchased and sold, financial 
                        guarantees purchased and sold, 
                        securities borrowing and lending, and 
                        repurchase agreements and reverse 
                        repurchase agreements;
                          (ii) concentrations in assets for 
                        which the values presented in financial 
                        reports are based on models rather than 
                        historical cost or prices deriving from 
                        deep and liquid 2-way markets; and
                          (iii) concentrations in market share 
                        for any activity that would 
                        substantially disrupt financial markets 
                        if the institution is forced to 
                        unexpectedly cease the activity.
  (c) Clarification.--
          (1) In general.--In establishing the minimum leverage 
        capital requirements and minimum risk-based capital 
        requirements on a consolidated basis for a depository 
        institution holding company or a nonbank financial 
        company supervised by the Board of Governors as 
        required under paragraphs (1) and (2) of subsection 
        (b), the appropriate Federal banking agencies shall not 
        be required to include, for any purpose of this section 
        (including in any determination of consolidation), a 
        person regulated by a State insurance regulator or a 
        regulated foreign subsidiary or a regulated foreign 
        affiliate of such person engaged in the business of 
        insurance, to the extent that such person acts in its 
        capacity as a regulated insurance entity.
          (2) Rule of construction on board's authority.--This 
        subsection shall not be construed to prohibit, modify, 
        limit, or otherwise supersede any other provision of 
        Federal law that provides the Board of Governors 
        authority to issue regulations and orders relating to 
        capital requirements for depository institution holding 
        companies or nonbank financial companies supervised by 
        the Board of Governors.
          (3) Rule of construction on accounting principles.--
                  (A) In general.--A depository institution 
                holding company or nonbank financial company 
                supervised by the Board of Governors of the 
                Federal Reserve that is also a person regulated 
                by a State insurance regulator that is engaged 
                in the business of insurance that files 
                financial statements with a State insurance 
                regulator or the National Association of 
                Insurance Commissioners utilizing only 
                Statutory Accounting Principles in accordance 
                with State law, shall not be required by the 
                Board under the authority of this section or 
                the authority of the Home Owners' Loan Act to 
                prepare such financial statements in accordance 
                with Generally Accepted Accounting Principles.
                  (B) Preservation of authority.--Nothing in 
                subparagraph (A) shall limit the authority of 
                the Board under any other applicable provision 
                of law to conduct any regulatory or supervisory 
                activity of a depository institution holding 
                company or non-bank financial company 
                supervised by the Board of Governors, including 
                the collection or reporting of any information 
                on an entity or group-wide basis. Nothing in 
                this paragraph shall excuse the Board from its 
                obligations to comply with section 161(a) of 
                the Dodd-Frank Wall Street Reform and Consumer 
                Protection Act (12 U.S.C. 5361(a)) and section 
                10(b)(2) of the Home Owners' Loan Act (12 
                U.S.C. 1467a(b)(2)), as appropriate.

           *       *       *       *       *       *       *


                             MINORITY VIEWS

    In 2014, Democrats worked with Republicans to reach a 
reasonable compromise to increase the threshold for the Federal 
Reserve's Small Bank Holding Company Policy Statement (``Policy 
Statement'') for bank holding companies (``BHCs'') and savings 
and loan holding companies (``SLHCs''), from $500 million to $1 
billion in total assets.\1\ In general, the Federal Reserve 
limits the debt levels of BHCs and SLHCs to ensure that they 
are able to serve as a source of strength for their depository 
subsidiary. The Policy Statement allows certain small BHCs and 
SLHCs to hold more debt at the holding company level than would 
otherwise be permitted by capital requirements if the debt is 
used to finance up to 75% of an acquisition of another bank. 
The 2014 law included some conditions, such as excluding any 
BHC or SLHC with less than $1 billion that was engaged in 
significant nonbanking activities, and it gave the Federal 
Reserve the ability to exclude any BHC or SLHC from the Policy 
Statement, regardless of size, ``if exclusion is determined 
warranted for supervisory purposes.''
---------------------------------------------------------------------------
    \1\P.L. 113-250, H.R. 3329, 113th Congress, a bill to enhance the 
ability of community financial institutions to foster economic growth 
and serve their communities, boost small businesses, increase 
individual savings, and for other purposes, available at: https://
www.congress.gov/bill/113th-congress/house-bill/3329.
---------------------------------------------------------------------------
    Despite this recent bipartisan effort to double the 
threshold level, Republicans are pushing further increases 
without knowing the effect of the last increase. In the last 
Congress, the House passed a bill that would increase the 
Policy Statement threshold to $5 billion,\2\ which faced a veto 
threat from the Obama Administration.\3\ Last year, Republicans 
included a provision in H.R. 10, the Wrong Choice Act, to 
drastically raise the $1 billion threshold to $10 billion. Now 
that it is clear that these dangerous proposals will go 
nowhere, Republicans are attempting to advance H.R. 4771, the 
Small Bank Holding Company Relief Act, which would triple the 
threshold to $3 billion.
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    \2\H.R 3791, 114th Congress, a bill to raise the consolidated 
assets threshold under the small bank holding company policy statement, 
and for other purposes, available at: https://www.congress.gov/bill/
114th-congress/house-bill/3791.
    \3\Statement of Administration Policy, April 12, 2016, available 
at: https://obamawhitehouse.archives.gov/sites/default/files/omb/
legislative/sap/114/saphr3791r_20160412.pdf.
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    H.R. 4771 would dramatically raise the Policy Statement 
threshold without giving policymakers sufficient time to 
evaluate the benefits and costs of the 2014 adjustment. One 
such potential downside could be the acceleration of industry 
consolidation through more mergers and acquisitions that leads 
to fewer, not more, community banks and encouraging BHCs and 
SLHCs to increase debt, which could pose safety and soundness 
risks.
    It is worth noting even the Trump Administration's 
Department of the Treasury only recommended an increase in the 
Policy Statement threshold of $1 billion.
    According to 2016 data from the Federal Reserve, there were 
3,682 BHCs and 171 SLHCs with less than $1 billion. So under 
the current $1 billion threshold, the Policy Statement applies 
to about 87 percent of all BHCs and 72 percent of all SLHCs 
that collectively have nearly $1 trillion in assets,\4\ meaning 
a large majority of the industry can already benefit from the 
Policy Statement under the $1 billion threshold, including all 
truly small community financial institutions.
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    \4\See: https://www.federalreserve.gov/publications/2016-ar-
supervision-and-regulation.htm.
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    Furthermore, the current $1 billion threshold seems 
reasonable given that the Federal Deposit Insurance Corporation 
(FDIC) conducted an exhaustive study in 2012 defining a 
community bank, which included, among other factors, a dollar 
threshold of less than $1 billion in assets.\5\ This point was 
emphasized by Americans for Financial Reform in a letter to the 
Committee, as they wrote, ``A $3 billion limit is unjustified, 
as there is no evidence that community banks over $1 billion in 
size are currently too small to survive. According to a recent 
FDIC report, `While economies of scale are important for 
community banks, historical trends in the size distribution of 
community banks that have survived over the last quarter 
century do not suggest that economies of scale require a 
community bank to grow or merge to asset sizes larger than $1 
billion'. . . . The Committee should reject HR 4771.'''\6\
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    \5\FDIC, ``Community Banking Study,'' (Dec. 2012), available at: 
https://www.fdic.gov/regulations/resources/cbi/study.html.
    \6\Americans for Financial Reform, ``Letter to Congress: AFR 
Opposes A Dozen Deregulatory Bills Under Consideration at a House 
Financial Services Committee Markup,'' available at: http://
ourfinancialsecurity.org/2018/01/afr-opposes-dozen-deregulatory-bills-
consideration-house-financial-services-committee-markup/. For 
referenced FDIC report, see Stefan Jacewitz and Paul Kupiec, FDIC, 
``Community Bank Efficiency and Economies of Scale,'' (Dec. 2012), 
available at: https://www.fdic.gov/regulations/resources/cbi/report/
cbi-eff.pdf.
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    Tripling the Policy Statement threshold to $3 billion at 
this time is wholly unfounded. There has not been sufficient 
time to see what effect previously doubling the Policy 
Statement threshold to $1 billion just a few years ago really 
means for community banks and the communities they serve. 
Congress should examine the data and consider the benefits and 
costs before making further changes.
    For these reasons, we oppose H.R. 4771.

                                   Maxine Waters.
                                   Keith Ellison.
                                   Michael E. Capuano.
                                   Emanuel Cleaver.
                                   Carolyn B. Maloney.
                                   Daniel T. Kildee.
                                   Al Green.
                                   Gwen Moore.

                                  [all]