Systemic Risk Mitigation Act

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Systemic Risk Mitigation Act''.

SEC. 2. DEFINITIONS.

    In this Act:
            (1) Average daily closing price.--
                    (A) In general.--The term ``average daily closing 
                price'' means the average daily closing price of a 
                credit default swap on long-term subordinated debt of a 
                bank holding company during a 30-day period.
                    (B) Regulations.--The Board, through regulations, 
                shall develop a method to determine the daily closing 
                price of a credit default swap on long-term 
                subordinated debt of a bank holding company and shall 
                calculate the average daily closing price accordingly.
            (2) Bank holding company.--The term ``bank holding 
        company'' has the same meaning given such term in section 2 of 
        the Bank Holding Company Act of 1956 (12 U.S.C. 1841), but 
        shall only include such companies with total consolidated 
        assets greater than or equal to $50,000,000,000.
            (3) Board.--The term ``Board'' means the Board of Governors 
        of the Federal Reserve System.
            (4) Credit default swap.--The term ``credit default swap'' 
        has the same meaning given the term ``swap agreement'' in 
        section 206A of the Gramm-Leach-Bliley Act (15 U.S.C. 78c nt).
            (5) Long-term subordinated debt.--The term ``long-term 
        subordinated debt'' means unsecured bonds or other debt 
        instruments issued by a bank holding company that--
                    (A) is subordinated to the claims of depositors or 
                general creditors; and
                    (B) has a maturity date not less than 5 years.
            (6) Stress test.--
                    (A) In general.--The term ``stress test'' means an 
                evaluation designed by the Board to determine whether a 
                bank holding company--
                            (i) has the capital, on a total 
                        consolidated basis, necessary to absorb losses 
                        as a result of adverse economic conditions; and
                            (ii) is sufficiently capitalized to meet 
                        systemically important obligations.
                    (B) Regulations.--The term ``systemically important 
                obligation'' shall be defined in regulations prescribed 
                by the Board.
            (7) Tier 1 capital.--The term ``tier 1 capital'' has the 
        same meaning given in part 225 of title 12, Code of Federal 
        Regulations, as in effect on the date of enactment of this Act, 
        or any successor thereto.

SEC. 3. MARKET-BASED TRIGGER TO DETERMINE ADEQUACY OF CAPITAL.

    (a) Market-Based Trigger.--
            (1) Greater than 50 basis points.--
                    (A) In general.--In the case that the average daily 
                closing price exceeds 50 basis points--
                            (i) the Board shall notify the bank holding 
                        company that it needs to raise additional tier 
                        1 capital in order to reduce such closing price 
                        below 50 basis points;
                            (ii) not later than 14 days (or less if the 
                        Board makes a determination that conditions 
                        warrant a shorter period of time) after such 
                        notification under clause (i), such company 
                        shall submit to the Board an action plan 
                        detailing how the company intends on 
                        remediating its capital deficiency;
                            (iii) such company has 30 days to implement 
                        the plan submitted under clause (ii) after such 
                        plan is approved by the Board; and
                            (iv) if after the end of the 30-day period 
                        described in clause (iii) the average daily 
                        closing price exceeds 50 basis points, the 
                        Board and such company shall repeat clause (i) 
                        through (iii) until such closing price is less 
                        than or equal to 50 basis points.
                    (B) Appeal.--
                            (i) In general.--A bank holding company may 
                        appeal the findings of the Board under 
                        subparagraph (A) and request that the Board 
                        conduct a stress test.
                            (ii) Tolling.--An appeal made pursuant to 
                        clause (i) shall toll any deadline specified 
                        under subparagraph (A) until the conclusion of 
                        the appeals process.
                            (iii) Capital deficiency.--If the Board 
                        determines, after conducting a stress test 
                        pursuant to clause (i), that the bank holding 
                        company has a capital deficiency, the Board and 
                        the bank holding company shall repeat clause 
                        (i) through (iii) of subparagraph (A) in 
                        accordance with clause (iv) of such 
                        subparagraph.
            (2) Greater than 75 basis points.--In the case that the 
        average daily closing price exceeds 75 basis points--
                    (A) the Board shall notify the bank holding company 
                in accordance with clause (i) of paragraph (1)(A);
                    (B) such company shall submit and implement an 
                action plan in accordance with clause (ii) and (iii) of 
                paragraph (1)(A);
                    (C) the Board may suspend or limit dividends paid 
                by the bank holding company until such company's 
                average daily closing price is less than or equal to 50 
                basis points;
                    (D) the Board shall notify the company that it will 
                be placed into receivership in accordance with 
                paragraph (3) if the average daily closing price 
                exceeds 100 basis points;
                    (E) the Board shall conduct a stress test; and
                    (F) if the Board determines, after conducting a 
                stress test pursuant to subparagraph (E), that such 
                company has a capital deficiency, not later than 14 
                days (or less if the Board makes a determination that 
                conditions warrant a shorter period of time) after such 
                stress test is completed, such company shall submit and 
                implement an action plan in accordance with clause (ii) 
                and (iii) of paragraph (1)(A).
            (3) Greater than 100 basis points.--In the case that the 
        average daily closing price exceeds 100 basis points, the Board 
        shall place the company into receivership in accordance with 
        the orderly liquidation authority provided under title II of 
        the Dodd-Frank Wall Street Reform and Consumer Protection Act 
        (12 U.S.C. 5381 et seq.).
    (b) Failure To Submit Action Plan.--A failure by a bank holding 
company to submit an action plan pursuant to subsection (a) within the 
time period required under such subsection shall result in the Board 
placing such company into receivership as described in subsection 
(a)(3).
    (c) Limitation on Claims for Holders of Long-Term Subordinated 
Debt.--Any entity that is a holder of long-term subordinated debt of a 
bank holding company that has been placed into receivership pursuant to 
this section shall receive the lesser of--
            (1) 80 percent of the face value of such debt; or
            (2) the residual value of such company after all other 
        claims of other creditors have been satisfied.
    (d) Subordinated Debt Requirement.--
            (1) In general.--The Board shall require each bank holding 
        company to issue and maintain long-term subordinated debt in an 
        amount greater than or equal to 15 percent of the total 
        consolidated assets of such company.
            (2) Deadline.--A bank holding company shall meet the 
        requirement set forth in paragraph (1) no later than the 
        effective date of this section.
            (3) Failure to meet requirement.--If a bank holding company 
        fails to meet the requirement set forth in paragraph (1), such 
        company shall submit a plan to the Board describing the steps 
        the company will take to meet such requirement.
    (e) Effective Date.--This section shall take effect 2 years after 
the date of the enactment of this Act.

SEC. 4. REPEAL.

    (a) Prohibitions on Proprietary Trading.--Section 13 of the Bank 
Holding Company Act of 1956 (12 U.S.C. 1851) is repealed.
    (b) Enhanced Prudential Standards.--Section 165 of the Dodd-Frank 
Wall Street Reform and Consumer Protection Act (12 U.S.C. 5365) is 
repealed.

Summary: Systemic Risk Mitigation Act - Establishes a framework for a market-based trigger to monitor and regulate the adequacy of bank capital of those bank holding companies whose total consolidated assets are $50 billion or more. Directs the Board of Governors of the Federal Reserve System to notify a bank holding company whose average daily closing price exceeds either 50 basis points, or 75 basis points, that it must raise additional tier 1 capital in order to reduce such thresholds. Requires the Board to place into receivership a bank holding company whose average daily closing price exceeds 100 basis points, in accordance with the orderly liquidation authority provided under title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Subjects to receivership a bank holding company that, after notification by the Board, fails to submit an action plan required under this Act. Sets forth a limitation upon claims of holders of the long-term subordinated debt of a bank holding company that has been placed into receivership. Directs the Board to require each bank holding company to issue and maintain long-term subordinated debt of at least 15 of its total consolidated assets. Amends the Bank Holding Company Act of 1956 to repeal prohibitions against proprietary trading and certain relationships with hedge funds and private equity funds. Amends the Dodd-Frank Wall Street Reform and Consumer Protection Act to repeal requirements for enhanced supervision and prudential standards for Board-supervised nonbank financial companies and certain bank holding companies.