prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 1.

Report 1: Many Members of Congress became actively engaged in foreign policy debates over U S  intervention in the 1992-1995 war in Bosnia and Herzegovina (hereafter, "Bosnia")  Congress monitored and at times challenged the Bush and Clinton Administrations' response to the conflict through numerous hearings, resolutions, and legislative initiatives  Many observers contend that the United States is a stakeholder in Bosnia's future because of the strong impact of U S  intervention on the postwar Bosnian state  Nearly 25 years after warring parties in Bosnia reached the Dayton Agreement (see below), Bosnia faces numerous internal and external challenges, and the country retains geopolitical importance to U S  interests in the Western Balkans  As Congress assesses ongoing and emerging security issues in the region, including resilience against malign external influence, renewed conflict, and radicalization, Bosnia's internal politics and its role in Balkan stability may merit further examination  Bosnia has existed in various forms throughout its history: a medieval kingdom, territory held by two major empires, a federal unit, and, since 1992, an independent state  Bosnia's present international borders are largely consistent with its administrative boundaries under later periods of Ottoman Turkish rule  After World War I, Bosnia became part of the newly created Kingdom of Serbs, Croats, and Slovenes  It was one of the six constituent republics of the Socialist Federal Republic of Yugoslavia from 1945 until 1992  Bosnia's constitution stems from the U S -brokered Dayton Peace Agreement that ended the country's 1992-1995 war  It recognizes three "constituent peoples": Bosniaks, Croats, and Serbs  All three groups are Slavic  Religious tradition is considered a marker of difference among the three ethnic identities: Bosniaks are predominantly Muslim, Serbs are largely Orthodox Christian, and Croats are mostly Catholic  Although Bosnian, Croatian, and Serbian are recognized in Bosnia as distinct official languages, they are mutually intelligible  Bosniaks comprise approximately 50 1% of the population, Bosnian Serbs 30 8%, and Bosnian Croats 15 4%  In this report, Bosnian is used as a non-ethnic term for a person or institution from Bosnia  A Bosnian Serb is an ethnic Serb from Bosnia and a Bosnian Croat is an ethnic Croat from Bosnia  Bosniak refers to Slavic Muslims  Bosnia's religious and cultural diversity is one of its distinctive characteristics  Islam was introduced to part of Bosnia's population during the Ottoman period, although there were also large Catholic, Orthodox Christian, and Jewish communities  Bosnia was the most heterogeneous Yugoslav republic and the only one where no ethnic group formed an absolute majority  During the 1990s, some popular accounts of Bosnia (and the former Yugoslavia) depicted its ethnic relations as "ancient hatreds," implying that the country's ethnic groups cannot peacefully coexist and that the 1992-1995 war was unavoidable  However, many experts on the region reject this thesis  Although Bosnia has experienced episodes of communal violence and bloodshed, most recently during World War II and the 1992-1995 war, its heterogeneous population also has lived in mixed communities for periods of peace  Many experts contend that ethnic conflict often was stoked by domestic leaders who manipulated historical memory and grievances to further their own agendas, or by external powers seeking to rule Bosnia or annex its territory  In the 1980s, Yugoslavia's escalating political and economic crises fueled nationalist movements  Nationalist leaders in Serbia and Croatia appealed to Bosnian Serbs and Croats as ethnic "kin " The party that ruled Croatia for most of the 1990s, the Croatian Democratic Union (HDZ), established a sister party with the same name to mobilize Bosnian Croats and compete in Bosnia's elections  This gave Croatia an avenue of influence in Bosnian politics  Serbia, led by strongman Slobodan Milošević, likewise had influence over Bosnian Serb leaders  In Bosnia's November 1990 elections—the first competitive elections in decades—voters cast aside the ruling League of Communists party and elected ethnic parties that largely continue to dominate today  Bosnian voters backed independence in a 1992 referendum, following in the footsteps of Slovenia, Croatia, and Macedonia  Bosnian Serbs, who did not want to separate from Yugoslavia, boycotted the referendum  Bosnian Serb forces seized more than two-thirds of Bosnia's territory, and a three-year conflict followed that pitted Serb, Croat, and Bosniak forces against one another  Bosnian Serb leaders declared a "Serb Republic" ( Republika Srpska) in March 1992, while Bosnian Croat leaders proclaimed the Croat Community of Herceg-Bosnia in July  Some Bosnian Croat and Bosnian Serb leaders advocated unification with Croatia and Serbia, respectively, where government factions—including their strongman leaders—likewise wanted to carve a Greater Croatia and Greater Serbia out of Bosnia's territory  Bosniak leaders opposed dismemberment of the state  Bosnia's war was one of the most lethal conflicts in Europe since World War II  Bosnian Serb forces besieged Sarajevo for 44 months  More than 10,000 people, mostly civilians, died due to shelling, sniping, and blockade-related deprivation  Paramilitary factions from neighboring Croatia and Serbia—some of which reportedly had ties to the Croatian and Serbian government—fought alongside Bosnian Croats and Serbs  The Serb-dominated Yugoslav National Army also aided Bosnian Serb forces, giving them a military advantage  In many areas, combatants from the three groups killed or expelled members of other ethnic groups to "purify" territory that they wanted to claim as their own  This "ethnic cleansing" changed Bosnia's demographic landscape  An estimated 100,000 or more Bosnians were killed in the conflict, and roughly half of its population displaced  In addition, an estimated 20,000 or more women and girls were victims of sexual violence  Hundreds of Bosnians have been prosecuted for war crimes at the International Criminal Tribunal for the former Yugoslavia (ICTY) and in Bosnian courts  In 2016, the ICTY convicted wartime Bosnian Serb leader Radovan Karadžić of genocide and war crimes  In 2019, the tribunal rejected his appeal and increased his sentence from 40 years to life  Citizens of Croatia and Serbia have also been indicted for crimes committed in the Bosnian war  Highly publicized incidents in 1994 and 1995 underscored the war's human toll  Bosnian Serb forces bombarded a Sarajevo market in 1994 and 1995, resulting in over 100 civilian deaths  In July 1995, Serb forces commanded by Ratko Mladić seized and executed more than 8,000 Bosniak men and boys in a U N -designated safe area around the city of Srebrenica, an incident subsequently seen by some as a consequence of the international community's muddled, ineffectual response to the conflict  The International Court of Justice and ICTY subsequently ruled that the Srebrenica massacres constituted an act of genocide  Mladić was convicted of genocide and other crimes in 2017  These incidents increased pressure on U S  policymakers to take a stronger role in resolving a conflict that had largely been left to the EU and the United Nations  Under U S  command, NATO intervened in August and September 1995 with air strikes against Bosnian Serb targets, while allied Bosniak and Croat forces launched a simultaneous offensive in western Bosnia  The United States played a key role in brokering several agreements  The 1994 Washington Agreement ended the "war within a war" between Bosniaks and Croats  In November 1995, leaders from Croatia, Bosnia, and Serbia met at the Wright-Patterson Air Force base in Dayton, OH, to negotiate a peace agreement  U S  diplomat Richard Holbrooke played a crucial role in brokering the General Framework Agreement for Peace in Bosnia and Herzegovina, more commonly known as the Dayton Peace Agreement  Bosnia's complex political system is a product of the Dayton Agreement; one of its annexes serves as Bosnia's constitution (Annex 4)  Its provisions partly reflect the situation on the ground in 1995, including the subdivision of Bosnia into two ethnoterritorial entities ( Figure 1 ): Republika Srpska ("RS"), which Bosnian Serb leaders had proclaimed in 1992, and the Federation of Bosnia and Herzegovina ("FBiH," predominantly populated by Bosniaks and Croats), which was created by the 1994 Washington Agreement  Entity borders were largely drawn to form ethnic majorities, even though they also reflected territorial seizure and ethnic cleansing  Many Bosniaks view the division of Bosnia into these roughly equal entities as awarding the spoils of war to Bosnian Serbs, whom they regard as the aggressors  Many Bosnian Serbs, however, view the Serb-majority entity as a protection against marginalization  The designation of Bosniaks, Croats, and Serbs as Bosnia's three "constituent peoples" is a cornerstone of the Dayton system  Numerous government bodies have ethnic quotas requiring equal representation of the three groups  In these power-sharing institutions, delegates from each constituent group may veto measures that go against vital ethnic interests  While these arrangements make Bosnia's political system prone to gridlock, Dayton's negotiators viewed them as necessary to prevent any group from feeling marginalized in a context of low trust  Bosnia is a parliamentary republic with a high degree of decentralization  Its complex, tiered structure includes a central ("state-level") government, the two entities, the autonomous Brčko district, and cantonal and municipal governments  The central ("state-level") government covers the entirety of Bosnia  A three-member presidency is the head of state, and includes one Serb member who is elected by RS voters, and one Bosniak and one Croat member elected by FBiH voters  The Council of Ministers, led by a Chairperson, is roughly equivalent to a cabinet government and prime minister in other parliamentary systems  The Parliamentary Assembly is a state-level legislature with two chambers: a directly elected House of Representatives (42 members) and an indirectly elected House of Peoples (5 Serbs, 5 Croats, and 5 Bosniaks)  The state-level government is considered to be weak, despite some expansion of its functions in the 2000s  Its major responsibilities include foreign relations; trade, customs, and monetary policy; migration and asylum policy; defense; and intelligence  Bosnia is further subdivided into two ethnoterritorial entities: Republika Srpska (RS), where Serbs are the largest ethnic group (82%), and the Federation entity (FBiH), where Bosniaks (70%) and Croats (22%) are the largest groups  The two entities have broader policy jurisdiction than the state-level government  Governing functions that are not assigned to the state-level government fall to the entities  These include civilian policing, economic policy, fiscal policy, energy policy, and health and social policy, as well as other issues  Each entity has its own constitution, as well as a president, vice presidents, legislature, and cabinet government with a prime minister  Each entity may establish "special parallel relationships" with neighboring states (i e , Croatia and Serbia)  Numerous entity bodies also incorporate ethnic quotas  Brčko district, a border region in northeastern Bosnia, was initially administered by the international community to allay concerns about RS secession  Brčko's location interrupts RS's contiguity, and both entities initially claimed it  Brčko was later awarded to both entities, but remains a self-governing district whose population is a mix of all three constituent peoples  Some analysts believe it has been relatively more successful than the entities in passing reforms and reintegrating its divided population (e g , ethnically mixed schools with a common curriculum)  FBiH entity is further divided into ten cantons, many of which were drawn to form ethnic Bosniak or Croat majorities  The cantons have jurisdiction in many policy areas, including policing, housing, culture, and education  They also have their own constitutions—based on the FBiH constitution—as well as legislatures and cabinet-style governments  FBiH and RS are further divided into 79 and 64 municipalities, respectively  The Dayton Agreement established a strong oversight role for the international community  The Office of the High Representative (OHR) was created to monitor the implementation of civilian aspects of Dayton  The High Representative is supported by the Peace Implementation Council (PIC), a group of 55 countries and agencies  A 1997 PIC conference empowered the High Representative to impose binding decisions and sanction politicians who obstruct Dayton  Until the mid-2000s, the High Representative used these powers to remove officials deemed to be obstructive to peace and to promote what are considered among the most constructive reforms since Dayton, including merging the entities' armed forces and intelligence services and putting them under new state-level ministries  However, the High Representative's proactive role has since decreased  This is partly due to criticism that the OHR lacks democratic legitimacy and accountability  Bosnian Serb politicians have claimed that the OHR's interventions support Bosniak leaders' preference for a more centralized state  At the same time, some U S  and EU policymakers believed that the attraction of EU membership could incentivize reforms in place of the OHR's more top-down approach  The international community also plays an ongoing security role  NATO led the Implementation Force (IFOR) and the smaller Stabilization Force (SFOR) that monitored security aspects of the Dayton Peace Agreement  The initial deployment of NATO ground forces to Bosnia numbered nearly 60,000, of which the largest share (approximately one-third) was from the United States  The number of troops subsequently decreased  In 2004, NATO's peacekeeping role was transferred to the EU with the understanding that NATO would assist if necessary  The size of the EU operation (EUFOR Althea) decreased from 7,000 troops in 2004 to roughly 600 troops today  Many analysts contend that the Dayton Agreement helped hold Bosnia together after the war; they point to the absence of widespread violence since 1995 as an indicator of its success  However, observers also question whether Bosnia can function much longer under the Dayton system  They identify several key challenges: Critics claim that Bosnia's political system reinforces the country's ethnic divisions and makes ethnicity a core basis of political identity  The ethnic parties that have dominated politics since the war generally appeal to voters from their respective ethnic communities rather than all Bosnians  Critics accuse ethnic party leaders of inflaming nationalist tensions and manipulating historical memory to distract from corruption and win elections, thus aggravating rather than bridging the deep wounds that remain from the war  In some parts of Bosnia, divisions are further reproduced at the societal level through institutions like segregated schools, which separate schoolchildren from different ethnic groups and teach them different curriculum  Some analysts also contend that the system is too gridlock-prone to pass major political and economic reforms to be passed, even with the incentive of potential EU membership  Bosnia's fractured, overlapping institutions sometimes muddle policymaking jurisdiction and impede coordinated response  Furthermore, power-sharing arrangements create numerous veto points in the legislative process  Government coalitions are typically ideologically broad and unwieldy, creating a further source of potential dysfunction  One of the consequences of these barriers is that it is difficult to pass legislation  The previous state-level Parliament, for example, adopted twelve new laws over the course of its 2014-2018 term  Corruption in Bosnia has roots in the country's wartime economy  A 2000 Government Accountability Office (GAO) report stated that "organized crime and corruption pervade Bosnia's national political parties, civil service, law enforcement and judicial systems  [Ethnic] parties control all aspects of the government, the judiciary, and the economy, and in so doing maintain the personal and financial power of their members " Many observers claim that the situation has improved little since then  In 2018, the High Representative warned that the rule of law has deteriorated, while the U S  State Department describes the rule of law as "an existential issue " Bosnia's major parties allegedly siphon from the state apparatus and public enterprises in their strongholds to amass wealth and power  Furthermore, parties in power reportedly politicize hiring in Bosnia's public sector, which employs an estimated third or more of the working population  For many Bosnians, satisfactory employment depends on having the right political connections, which creates a dependence that reportedly is exploited during elections  In 2018, the outgoing U S  ambassador to Bosnia decried the "[Bosnian] politicians who seek to destabilize the country in order to remain in power at all costs for personal profit and protection " Many analysts believe that Bosnia's entrenched ethnic parties benefit tremendously from the status quo and have little incentive to reform the system  Bosnia's MPs are among the best-paid in Europe relative to local incomes, commanding six to eight times the average Bosnian salary  Parties and politicians who gain office in the government or administration often find "a remarkably efficient path to personal enrichment " Politicians are skilled at using veto points to block legislation that threatens their position in Bosnia's patronage system  According to one analyst, Bosnia's patronage system is "the raison d'etre of the political elites and is the main cause of the state's dysfunctionality and resistance to reform " Bosnia's entrenched political class may also fear penalty if serious reforms are enacted and shine the spotlight on malfeasance  Criminal indictments against leaders in neighborhood countries like Romania, Croatia, and North Macedonia highlight this risk  Analysts believe these disincentives make entrenched politicians resistant to external pressure for reform  Several major rounds of U S - and EU-brokered constitutional reform efforts, including in 2006, 2008, and 2009, ultimately failed  Germany and the United Kingdom launched a major initiative in 2014 to shift the focus from difficult constitutional reforms to seemingly more feasible socioeconomic reforms that they hoped would improve Bosnia's economy and dismantle patronage networks  The 2015 "Reform Agenda" identified economic, administrative, and legal measures to be adopted by entity- and state-level governments  The process, which required the major parties to commit in writing to the reform framework, was supported by the EU, the International Monetary Fund, the World Bank Group, and the United States  As an incentive for politicians to agree to the Agenda, the EU offered the entry into force of Bosnia's long-stalled Stabilization and Association Agreement, which marked the first step toward EU membership  However, most observers view the Reform Agenda as largely unsuccessful; many of its provisions failed when entrenched parties objected to measures that would undercut their dominance  While many officials recognize that Bosnia's political system needs reform, there is little consensus on how to change it or to generate the political will to find common ground so long as the dominant parties remain entrenched  Bosnian Serb leaders have expressed a desire to return to the "original" Dayton system, when the entities had greater competencies in security and justice  Milorad Dodik, who has dominated politics in Republika Srpska since the 2000s, has gone further by repeatedly threatening RS secession  Bosnian Croat leaders from the largest Croat party, the Croatian Democratic Union of Bosnia (HDZ-BiH), call for more autonomy for Croats, and have raised the prospect of splitting FBiH to create a third Croat-majority entity  By contrast, Bosniak leaders generally prefer more centralization and the removal of some of the institutional arrangements that they believe contribute to dysfunction and gridlock  Some Bosniak officials also have proposed dismantling the entities or eliminating FBiH's cantons  Survey research documents Bosnian citizens' anger toward the political class and their distrust of political institutions  In a 2018 International Republican Institute survey, 86% of respondents expressed belief that Bosnia is heading in the wrong direction  An estimated 170,000 individuals—disproportionately young and skilled—have emigrated since 2013  Dissatisfaction with education and healthcare, insecurity, and nepotism are cited as key motives to emigrate  Nevertheless, some analysts believe that periods of social discontent in 2014 and 2018, which challenged the system but appeared to transcend ethnic divides, suggest that strengthening Bosnian civil society could increase pressure for reform, and perhaps cultivate a new generation of party leaders  Other observers have put their hopes for reform in Bosnia's so-called "civic parties," which do not have nationalist platforms and typically mobilize voters on the basis of socioeconomic interests rather than ethnicity  While these parties have not matched the results of the ethnic parties, their electoral performance has improved in recent years  Bosnia's challenges came to the forefront during its most recent general election on October 7, 2018 (see Table 1 )  The Central Election Commission (CEC) registered 60 parties and over 3,500 candidates for state-level, entity, and cantonal offices  Observers noted that the campaign climate was more divisive and nationalist in tone than usual  Despite broad voter dissatisfaction, entrenched ethnic parties won the largest vote shares  Almost six months after the election, the parties are still negotiating over government formation at the state level and in FBiH; however, it appears that entrenched ethnic parties will continue to dominate  In March 2019, the leaders of the largest Bosniak, Croat, and Serb parties stated that they had agreed to a set of principles to guide forming the state-level government (the Council of Ministers)  Some observers viewed the improved result of civic parties (one-third of the vote in FBiH) as a positive development  Some of the most controversial outcomes concern the elections to the state-level presidency, composed of three members (one Bosniak, one Croat, and one Serb)  In a closely fought race, Šefik Džaferović, candidate of the ethnic Bosniak SDA party, narrowly defeated the candidate of the civic SDP party (36 6% and 33 5%, respectively), retaining the lock that the SDA has had on the Bosniak seat in most elections since 1996, but perhaps auguring a future victory by a civic party candidate  Prior to the election, some analysts expressed concern at the prospect of two of the three seats on the presidency being held by the nationalist Bosnian Serb leader Milorad Dodik and his ally, the nationalist Bosnian Croat politician Dragan Čović  Both politicians have explicitly or implicitly challenged the legitimacy of Bosnian statehood and called for greater ethnoterritorial autonomy  However, to the surprise of some observers, Željko Komšić of the civic Democratic Front defeated incumbent Čović for the Croat seat with 53% of the vote  Komšić was previously elected as the Croat member of the presidency in 2006 and 2010, and is considered to be a moderate political figure who generally supports centralizing reforms  In contrast to HDZ-BiH leader Čović, he does not have strong ties to the Croatian government  Komšić's election as the Croat member of the presidency in 2006 and 2010 was mired in controversy amid complaints that he only won with the support of Bosniaks who voted in the election for the Croat member on the presidency rather than the Bosniak member  Komšić identifies as Croat but has been leader of several civic parties  He comes from central Bosnia, and not from the Croat-majority western regions that are the stronghold of the HDZ  Although it is not illegal for Bosniaks to vote for the Croat seat on the presidency rather than the Bosniak seat, some Croat leaders (especially HDZ-BiH and HDZ-1990) claim that it violates the spirit of Dayton and results in illegitimate representation of Croats  Similar accusations of ethnic cross-voting surfaced after Komšić's victory in 2018  Some analysts expect Komšić's victory to harden the HDZ-BiH position on electoral reform (see "Legal Challenges," above) and possibly embolden politicians who seek a separate entity  As most pre-election polls anticipated, RS strongman Milorad Dodik defeated the more moderate incumbent Serb member of the presidency with 54% of the vote  Dodik has dominated entity politics in RS since the mid-2000s as entity prime minister and president  Analysts note that RS's political environment grew more closed as Dodik consolidated power  Dodik has run afoul of the United States and the EU by frequently threatening to hold a referendum on RS secession, questioning the legitimacy of Bosnian statehood, and cultivating close ties to Russia (see below)  The U S  Treasury Department sanctioned him in 2017 for actively obstructing Dayton  Many analysts have expressed concern that Dodik will use his new position to obstruct the workings of the central government while continuing to dictate politics in RS through loyal allies  Shortly after the election he vowed to "work above all and only for the interests of Serbs " One of his first acts as head of state was to call for Bosnia to recognize Ukraine's Crimea region as Russian territory  In December 2018, the National Assembly of RS approved the creation of several new ministries, an act that some view as an attempt to wrest competencies from the state-level government  In early 2019, the RS parliament courted controversy when it passed legislation to create a new commission to reinvestigate the events of Srebrenica, which many view as an attempt to deny or downplay the massacres  Since the election, the formation of governments has proceeded piecemeal, and legal challenges to election law in FBiH (see above, "Legal Challenges") initially cast doubt over the formation of that entity's government  The RS National Assembly approved the new entity government in December 2018  Party leaders continue to negotiate over forming governments in FBiH and the state-level Council of Ministers  Because the FBiH government did not fix electoral legislation before the election, the Electoral Commission adopted a decision to assign delegates to the House of Peoples based on the 2013 census  (The Electoral Commission's actions reportedly came amid strong pressure from U S  and EU officials)  Several Bosniak parties challenged the decision before the Constitutional Court; however, the Court declined to take on the case  Bosnia is one of Europe's poorest countries  The 1992-1995 war caused an estimated $110 billion in damage, and Bosnia's economy contracted to one-eighth of its prewar level  Despite significant reconstruction and recovery since 1995, GDP per capita was $5,148 in 2017, well below the EU average ($33,715) and that of Bulgaria ($8,031), its lowest-ranking member  Nearly one in five Bosnians lives below the poverty level  Bosnia's unemployment rate was 18% in 2018, down from 28% in 2015  Youth unemployment also declined in recent years from 60% to 46%  Nevertheless, these rates are still high by European standards  Since 2015, annual GDP growth has averaged around 3%, but it is largely driven by consumption (much of which in turn is fueled by migrant remittances)  The IMF has urged Bosnia to privatize or restructure the nearly 550 state-owned enterprises that comprise roughly 20% of its economy; many of them are unprofitable but allegedly are used by politicians as "cash cows and workplaces for loyal cadres " Bosnia participates in several free trade schemes  In 2006, it joined the Central European Free Trade Agreement (CEFTA) alongside other non-EU countries in the region, including other ex-Yugoslav neighbors  Bosnia's Stabilization and Association Agreement (SAA) with the European Union, which entered into force in 2015, provides for almost fully free trade  A free trade agreement with the European Free Trade Association (EFTA) also entered into force in 2015  The EU is Bosnia's primary trade partner  Germany, Italy, Croatia, Slovenia, and Austria are Bosnia's key EU export markets, accounting for more than half of its exports in 2017  Serbia, another CEFTA signatory, is also an important export market  Bosnia's major exports include vehicle seats, raw materials, leather products, textiles, energy, and wood products  The EU is also Bosnia's primary source of foreign direct investment (FDI)  In 2016, 63% of Bosnia's FDI came from EU countries, with Austria, Croatia, and Slovenia the top sources  Serbia is also a significant source of FDI (16 3%)  However, Bosnia's fragmented legal and administrative structure create a challenging investment climate  Many relevant laws differ between the two entities  Corruption, entrenched economic interests, and political instability also deter investment  As a result, FDI amounts to just 2% of Bosnia's GDP, well below the Western Balkan average of 5%  Bosnia was the region's lowest-rated country in the World Bank's 2019 Ease of Doing Business Index  U S  and EU policymakers view the NATO and EU accession processes as a positive force for democratization and reform in the Western Balkans, including Bosnia  According to analysts, this assessment informed the United States' partial retreat from the region in the 2000s and 2010s  EU membership is one of the few policy issues for which there is relatively broad consensus among Bosnia's politicians and population  The EU's "fundamentals first" approach to enlargement in the Western Balkans frontloads the accession process with meeting the core requirements of having a democratic political system and functioning market economy; in Bosnia, the EU is currently focused on issues relating to the rule of law, public administration reform, and economic development  In 2016, Bosnia submitted its application to join the EU  Its current status is potential candidate , which entitles it to receive financial assistance from the EU's Instrument for Pre-Accession Assistance II (IPA II)  Between 2014 and 2020, Bosnia is expected to receive €552 million in IPA II allocations, making the EU Bosnia's largest source of foreign assistance  Many EU member states provide additional aid to Bosnia through domestic foreign assistance programs  Bosnia's EU membership prospects are uncertain  In a 2018 progress report, the European Commission (the EU's executive) flagged Bosnia's slow implementation of reforms, including the 2015 Reform Agenda (a flagship EU initiative in Bosnia) and numerous domestic and international court rulings (see "Legal Challenges," above)  Some analysts question whether Bosnia, under its current political system, would be capable of meeting the membership requirement of harmonizing domestic legislation with the many thousands of provisions in the acquis communautaire, the cumulative body of EU legislation, case law, and regulations  In comparison to EU membership, Bosnian leaders are more divided over the issue of joining NATO  These divisions largely fall along Bosnian Serb and Bosnian Croat/Bosniak lines  Bosnian Serb opposition is rooted in resentment over NATO's role in the Bosnian war, and may also reflect a desire to remain in lockstep with neighboring Serbia, which also does not seek NATO membership  Bosnia joined NATO's Partnership for Peace in 2006 and secured an Individual Partnership Action Plan in 2008  In 2010, NATO indicated that it would launch a Membership Action Plan (MAP)—a program to help aspiring members meet membership requirements—once Bosnia meets several conditions, the most challenging of which is the reregistration of permanent defense installations from entity to state-level government  RS officials have resisted ceding control over defense installations on entity territory  Although Bosnia does not yet meet these requirements, in December 2018 NATO foreign ministers invited Bosnia to activate its MAP by submitting its first Annual National Program  Some analysts interpreted this invitation as a gesture to generate reform momentum in Bosnia's fragile post-election period  The Bosniak and Croat members of the presidency responded positively, but Bosnian Serb leaders (and most Bosnian Serbs) do not want Bosnia to join NATO  In October 2017, the RS National Assembly passed a resolution supporting military neutrality  RS President Željka Cvijanović reiterated this stance after NATO's invitation, and Dodik—now a member of the state-level presidency—also has vowed to pursue military neutrality  Bosnia's relations with Croatia and Serbia are seen as an important component of regional stability  However, bilateral relations have often been fraught as a legacy of the Bosnian war, as well as sensitivities over Croatia and Serbia's relations with Bosnian Croats and Serbs  While democratic gains in Croatia and Serbia after 2000 contributed to improved relations with Bosnia, they remain reluctant to examine or acknowledge their role in the Bosnian war  At times, Bosnian leaders have objected to what they describe as Croatian and Serbian meddling in Bosnia's affairs  Ex-Bosnian Croat member of the presidency Dragan Čović and current Bosnian Serb member of the presidency Milorad Dodik draw support from leaders in Croatia and Serbia and reportedly hold Croatian and Serbian citizenship, respectively, alongside their Bosnian citizenship  The Croatian government financially and politically backed Čović in Bosnia's 2018 elections, and Croatian politicians have raised the issue of Bosnian Croats' constitutional challenges (see above, "Legal Challenges") in forums like the European Parliament, NATO, and the United Nations  These moves prompted three former High Representatives to Bosnia to issue a joint letter expressing alarm over Croatia's "meddling" in Bosnia's internal affairs  The Croatian government also challenged the legitimacy of Željko Komšić as the Croat member of the Bosnian presidency (see above, "2018 General Election")  Some parties in Croatia hold Croatian election campaign events on Bosnian territory to mobilize Bosnian Croat voters with dual citizenship to vote in Croatia's elections  The Serbian government likewise supports Dodik, who is a frequent visitor to Belgrade  Some Serbian politicians have made statements supporting convicted Bosnian Serb war criminals, inflaming an issue that remains highly sensitive in Bosnia  Bosnia and Serbia have an unresolved demarcation dispute over approximately 40 square kilometers of border area, including a railway segment and hydroelectric power stations  Bosnia has dual citizenship treaties with Croatia and Serbia, resulting in hundreds of thousands of Bosnian Croats and Bosnian Serbs acquiring dual citizenship  This has raised jurisdictional issues in cases in which indicted war criminals hold dual citizenship  Despite occasional tensions in their relations, Croatia and Serbia are important economic partners for Bosnia  Both countries are among Bosnia's top export markets and top sources of FDI  As part of its enlargement strategy in the Western Balkans, the EU has embraced a connectivity agenda to improve regional transportation, energy, and infrastructural linkages, reserving up to €1 billion in grants for projects for the period 2015-2020  Officials believe that improved connectivity could benefit bilateral relations and contribute to regional stability  Given its strategic location and relatively small, weak states, the Balkan region has long drawn in more powerful states  Many analysts maintain that as the United States and the European Union have both scaled back their presence in the Balkans to address other issues since the late 2000s, Russia, Turkey, and China partly filled the vacuum  U S  and EU officials have expressed concern over Russian influence in the Western Balkans, particularly after Russia occupied Ukraine's Crimea region in 2014  Many analysts maintain that Russia does not have a grand strategy in the Western Balkans, but rather aims to prevent Euro-Atlantic integration and shore up its claims to great power status by asserting itself in the EU's "inner courtyard " Analysts have identified several Russian tools in the region, including playing a "spoiler" role, projecting soft power, and leveraging energy dominance  Observers contend that Russia plays a "spoiler" role in Bosnia by exacerbating ethnic divisions, backing illiberal or anti-Western political factions, and helping to militarize RS  They claim that these actions help sustain the dysfunction and gridlock that undermine Bosnia's Euro-Atlantic reform efforts  Russia has supported Bosnian Serb and Bosnian Croat nationalist leaders Milorad Dodik and Dragan Čović  Dodik's meeting with Russian President Vladimir Putin just before Bosnia's October 7, 2018 general election was one of nearly ten meetings between the two over the past three years, signaling high-level Russian support  Many experts assert that Russia has been a key ally to Dodik in resisting Western pressure to cooperate on reforms  Moscow has also supported divisive RS policies  When Dodik violated a Bosnian Constitutional Court ruling in 2016 by holding a referendum to establish a controversial "Statehood Day," Russia stood apart from the High Representative and Western diplomats by supporting the initiative  More recently, Russia stated its support for RS's controversial Srebrenica commission (see above)  Analysts have also expressed concern at Russia's apparent support for Čović, who has advocated greater autonomy for Croats and the creation of a third Croat entity  Some analysts have expressed concern at Russia's role in RS's security sector  Russian forces have trained RS police special forces on counterterrorism and intelligence  Some observers believe that these exercises contribute to militarization in RS, potentially pushing the police force beyond its civilian law enforcement mandate  Analysts caution that militarization could increase the scale of violence in any confrontation between RS and the Bosnian government  Some Bosnian Serb ultranationalist and veterans groups have fought alongside pro-Russia combatants in Ukraine, and analysts believe they could be mobilized to support RS leaders as well  Russian soft power draws upon religious and cultural kinship with Bosnian Serbs, as well as Russia's history of support during the wars of Yugoslav disintegration  Kremlin-linked media, like Sputnik and RT , amplify existing anti-Western narratives and positively shape public opinion toward Russia  Some local media further propagate Sputnik and RT articles  A 2018 National Democratic Institute media study found that RS media stories about Russia were overwhelmingly positive, while the tone of most stories about the United States and NATO was negative  Pro-Russian media glorifies the Russian military, highlights cultural and religious links between Serbs and Russians, and documents high-level meetings between RS and Russian officials  Economic relations between Russia and RS have deepened in recent years  Russia is the largest source of FDI in RS, and it is largely concentrated in the energy sector  In 2007, Russian state-owned oil company Zarubezhneft bought RS's Bosanski Brod oil refinery, motor oil processing facilities in nearby Modrica, and retailer Banjaluka Petrol  Some analysts believe that these assets—which were purchased without an open tender—give Zarubezhneft influence in RS  In addition to being an important employer, Zarubezhneft is RS's biggest taxpayer; its value-added tax and excise duty contributions reportedly account for 25% of RS budget revenue  Bosnia depends upon Russian natural gas imports via Ukraine  Energy policy is vested in the entities, and Russian natural gas provider Gazprom reportedly has used its market dominance to pit the two entities against one another and undermine projects that would diversify supplies  Many analysts believe that Turkey's influence in Bosnia has increased over the last two decades due to Ankara's close relationship with Bosniak leaders  Some Turkish officials reportedly view Bosnia as a natural sphere of influence given geographic and historical connections  Observers note that Turkish President Recep Tayyip Erdogan has at times invoked Ottoman-era ties to Bosnia and religious kinship with Bosniaks as soft power tools  Turkish influence in Bosnia has expanded since Yugoslavia's collapse  During the 1992-1995 war, Turkey gained prestige among Bosniaks by condemning the international arms embargo against Bosnia, arguing that it prevented Bosniaks from defending themselves  Turkey, as well as other predominantly Muslim countries like Iran and Saudi Arabia, reportedly supplied Bosniak forces with arms  Turkish influence has continued since the war's end  Bosnia is one of the top recipients of Turkish Cooperation and Coordination Agency assistance; much of this support is earmarked for projects to restore Ottoman-era buildings and monuments  A Turkish Cultural Center was established in Bosnia in 2003, and in 2009 the Yunus Emre Foundation, an NGO founded by the Turkish government, opened an office in Sarajevo to promote Turkish language and culture  Turkey has popular support among Bosniaks  In a 2018 International Republican Institute survey, 76% of Bosniak respondents had positive views of Turkey—the strongest support among Bosniaks for any foreign state  Many Bosnian Croats and Bosnian Serbs look to Croatia and Serbia as external protectors, and some analysts believe that Turkey has attempted to establish a similar role for itself vis-à-vis Bosniaks  Observers contend that Erdogan's ruling party has particularly strong ties to the largest Bosniak ethnic party, the SDA  Erdogan and Turkish state-owned media openly supported SDA candidate Bakir Izetbegović in his bid for the Bosniak seat on the presidency in 2014  Some observers believe that Izetbegović's clout within the SDA rests in part on his support from Erdogan  Economic relations between Bosnia and Turkey have deepened in recent years  Turkish FDI in Bosnia accounted for 5 6% of FDI flows in 2016  One notable project is a highway to connect Sarajevo to Belgrade, Serbia  After years of disagreement, Bosnian officials approved the route in February 2019  Turkey is expected to provide funding for some of the expected €3 billion in costs, although the terms of the contract are not yet resolved  Some officials, including French President Emmanuel Macron, have expressed concern over Turkey's alleged ambitions as part of broader EU concern over external influence in the Balkans  However, analysts caution that Turkey's ambitions and capabilities in the Balkans may be overstated  They note that the scope of Turkish investment is sometimes exaggerated in the media, and that proposed projects do not always come to fruition  While Russian and Turkish influence in Bosnia relies in part on soft power, China's presence in Bosnia is primarily economic  Between 2011 and 2019, Chinese investments in Bosnia amounted to an estimated $3 6 billion, primarily in the form of direct lending for energy and transportation projects  Chinese firms have contracts to construct or expand energy plants, including a €350 million loan to construct a coal-fired plant in Stanari, RS  A €1 4 billion deal was signed to construct a highway between Banja Luka and Mlinište  In March 2019, the EU Energy Community criticized the FBiH entity government's decision to guarantee a €600 million loan from China's Exim Bank to build a coal-fired power plant in Tuzla  However, some analysts caution that China's economic influence in Bosnia may be overstated at present  While China's pledged investments in high-visibility projects garner media attention, the actual amount of Chinese FDI is far less than that of the EU  Moreover, many pledged projects do not come to fruition  Nevertheless, EU and U S  officials have voiced concern over the scope of China's investments in the Balkans, as well as Chinese lending practices  Chinese loans often require recipient state governments to assume the loan burden, potentially leading to high external debt  The EU has also raised concerns that Chinese lending practices violate EU rules in public procurement because they frequently require use of Chinese contractors, laborers, or supplies  In contrast to EU funds, which are partly designed to spur reform, Chinese loans have few conditions and rules linked to transparency or reform  Finally, EU officials have expressed concern that China's economic might could be a source of leverage over recipient states that are candidates or potential candidates for EU membership and thus impede the EU's ability to speak with one voice on relations with China if they do become members  Bosnia was not a core transit country in the "Balkan Route" that hundreds of thousands of migrants and refugees followed in an attempt to reach the EU during heightened flows in 2015 and early 2016  However, recent route shifts have brought more migrant and refugee traffic through Bosnia  Since early 2018, an estimated 23,000 migrants and refugees have entered Bosnia; approximately 25% of them remain in the country  Most of them hope to enter EU territory via Bosnia's neighbor, Croatia, and from there move on and enter the EU's visa- and passport-free Schengen Area  However, the Croatian government has expanded border policing, and apprehended individuals are sent back to Bosnia  The EU provided €2 million in 2018 to help Bosnia respond to the crisis and provide shelter to migrants and refugees who are effectively stranded in Bosnia  The migration crisis has triggered a backlash from some Bosnians, particularly in Una-Sana Canton, which borders Croatia and has the highest concentration of migrants and refugees  Some residents of Bihać, Una-Sana's administrative center, protested against camps situated in their municipality in October 2018, while local authorities in Velika Kladuša, another city in the canton, reportedly obstructed the Ministry of Security's plans to house migrants in a local building  The incident illustrates local backlash as well as the state-level government's difficulty enforcing its decisions, even when it has jurisdiction  Islam was introduced to part of Bosnia's population during Ottoman rule  In socialist Yugoslavia, the semi-official Islamic Religious Community played a key role in religious affairs, including legal rulings and religious education  It was renamed the Islamic Community of Bosnia and Herzegovina in 1992, and remains an important religious institution  Islamic tradition in the Balkans, including Bosnia, is generally moderate and secular  The majority of Bosnia's practicing Muslims follow the Hanafi school of Sunni Islam  However, some analysts have expressed concern over the emergence of groups influenced or funded by state and non-state entities in the Arab Gulf states, where more conservative Hanbali Sunni practices are common  Aid workers, missionaries, and "mujahedeen" fighters from the Gulf States promoted transnational Islamist militancy and Salafist Hanbali religious doctrine during Bosnia's 1992-1995 war; Iran's government also supported Bosniak leaders and forces  After the war, Saudi Arabia provided an estimated $600 million in aid to repair and build hundreds of mosques and establish schools and cultural centers that promote socially conservative Sunni views  Iran has also maintained active cultural outreach and other ties to some Bosnian Muslims  Many analysts contend that Salafi groups have limited support in Bosnia because of the traditionally high level of secularism among Bosnian Muslims  They also note that few Bosnian Muslims who subscribe to Salafist ideas and practices have violent intentions, and many of them live in remote rural communities  While most of these groups were not originally affiliated with official religious organizations in Bosnia, the Grand Mufti of Bosnia's Islamic Community exerted pressure on them to acknowledge his authority and his right to monitor religious content  As a result, an estimated 90% of Salafi groups were brought under official structures  Nevertheless, some experts caution that radicalized groups and individuals may pose a terrorist threat despite their small numbers  Radicalized Muslims were implicated in the bombing of a police station in Bugojno in 2010 and a lone-gunman attack on the U S  Embassy in Sarajevo in 2011  The Islamic State (IS) and Nusra Front's gains in Syria and Iraq in the 2010s altered the dynamic of the terrorism threat in Bosnia and broadened the use of social media in recruitment  Between 2012 and 2017, an estimated 350 Bosnian citizens traveled from Bosnia or Bosnian diaspora communities to fight with armed groups in Iraq and Syria  More recently, returned foreign fighters are seen as a potential threat as the position of the IS and other armed groups has weakened  Bosnia's stock of illegal weapons, mines, and explosives may exacerbate the risk posed by returnees  As of December 2017, officials believed that just over 100 Bosnians remained in Syria (including women and children), roughly 50 had returned to Bosnia, and 70 had been killed in the conflict  In 2014, the Bosnian government introduced new criminal offenses to prosecute foreign terrorist fighters and recruiters  Several dozen returned fighters and domestic recruiters have been convicted of these offenses  While the U S  State Department describes Bosnia as a "cooperative counterterrorism partner," it warns that Bosnia's political fragmentation and dysfunction could undermine counterterrorism efforts  For example, in 2017 several ministries proposed new measures to tighten counterterrorism efforts; however, they were not enacted due to political gridlock in state-level and FBiH governments  Initially viewed as a "European problem," the Bosnian conflict eventually helped shape the post-Cold War role of the United States and NATO in European security  When the United States assumed greater responsibilities in resolving the conflict, its role was considerable: leading NATO airstrikes, garnering diplomatic support from Russia and European allies, persuading warring parties to agree to a ceasefire, brokering the Dayton Peace Agreement, and deploying 20,000 troops to Bosnia  According to Richard Holbrooke, the U S  official who brokered the talks, the Bosnian war was a pivotal period in U S  foreign policy in Europe: "The three main pillars of [policy]—U S -Russian relations, NATO enlargement into Central Europe, and Bosnia—had often worked against each other  Now they reinforced each other: NATO sent its forces out of area for the first time in its history, and Russian troops, under an American commander, were deployed alongside them " Some analysts and policymakers believe that the United States' strong hand in resolving the conflict and in shaping Bosnia's political system have made it a stakeholder in Bosnia's future  U S  officials, often in cooperation with the EU, have intervened to defuse crises and broker reform talks  The United States also has imposed sanctions against Bosnian officials: in addition to Dodik (see above), the U S  State Department publicly designated Bosnian Serb politician Nikola Špirić (Dodik's associate) for "significant corruption or gross violation of human rights " U S  policymakers attach strategic importance to Bosnia's stability; many analysts believe turbulence in Bosnia could reverberate in the Balkans and potentially draw in Croatia and Serbia, while instability in other parts of the region could spill over into Bosnia  When the Trump Administration indicated in 2018 that it would consider supporting a potential Serbia-Kosovo agreement to "adjust borders" between the two—a major break with the long-standing EU and U S  policy to oppose redrawing borders in the Balkans along ethnic lines—some analysts expressed concern that the Administration could reshape long-standing U S  policy toward Bosnia  However, the new U S  Ambassador to Bosnia stated in February 2019 that the U S  will continue to be "guarantor of Bosnia and Herzegovina's sovereignty and territorial integrity " On the other hand, many observers also note that U S  engagement in Bosnia (and the Western Balkans) decreased under the administrations of President George W  Bush and President Barack Obama  During this time U S  policymakers turned their focus to geopolitical crises and challenges in other parts of the globe while ceding the regional lead to the EU  Indeed, some analysts have urged the United States to assume a greater role in Bosnia, arguing that Bosnia's current crises warrant it, and that the EU and the United States are more effective in the region when they work together  Congressional interest in Bosnia dates back to the 1992-1995 war  Many Members featured prominently in foreign policy debates over U S  intervention in the conflict  In 2015, the House passed a resolution describing the Srebrenica massacres as a genocide and urging the United States to continue to support Bosnia's territorial integrity ( H Res  310 , 114 th Congress)  In the 114 th and 115 th Congresses, a bill was introduced in the Senate to establish an enterprise fund to promote economic development and the private sector in Bosnia ( S  2307 and S  864 )  In April 2018, the House Foreign Affairs Committee's Subcommittee on Europe, Eurasia, and Emerging Threats held a hearing on Bosnia's prospects ahead of its October 2018 elections  Congress's engagement with Bosnia also continues within the broader context of policy concern over the external influence of China, Turkey, and Russia in the Western Balkans and energy security  As a potential candidate for EU membership and NATO partner, Bosnia is eligible for assistance through the Countering Russian Influence Funds under the Countering America's Adversaries Through Sanctions Act (CAATSA) enacted in 2017 ( P L  115-44 )  Through congressionally approved (and sometimes expanded) foreign assistance appropriations, Bosnia has received more than $2 billion in aid since 1995  Between 1996 and 1999, the United States pledged $1 billion of the $4 billion international commitment to implementing Dayton's civilian provisions and helping to rebuild Bosnia  The cost of U S  military operations in Bosnia since 1992 is estimated at more than $10 billion ( Appendix I )  Bosnia continues to receive U S  foreign assistance, although the amount has decreased in recent years  Assistance to Bosnia in FY2015 and FY2016 was approximately $33 million each year  In FY2017, it was $53 5 million, and $41 5 million in FY2018  The Administration requested $21 million for FY2019 and $16 9 million for FY2020  Nearly 25 years after the Dayton Peace Agreement, Bosnia faces many challenges  In considering U S  relations with Bosnia, Members of Congress may consider the following questions: How can the United States encourage Bosnia's government to incorporate the legal rulings of the Bosnian Constitutional Court and the European Court of Human Rights into election legislation and the constitution? How can U S  foreign assistance be used to counter Russian influence in Republika Srpska, in particular Russia's close ties to Bosnian Serb politicians and its use of local media and Sputnik to amplify anti-U S  narratives and project pro-Russia soft power? What are the implications of potential militarization in Republika Srpska? How can the United States effectively address this alleged trend? How can the United States support a successful reform initiative that secures transparency and accountability, and facilitates a political community in which politicians and voters are committed to the Bosnian state and socioeconomic challenges that transcend all three ethnic groups? Can the Germany-U K  initiative from 2015 be revived, or is it better to start from scratch? Are the approximately 600 troops in the European Union Force mission in Bosnia sufficient to stabilize Bosnia if violence breaks out? If Serbia and Kosovo agree to normalize relations by redrawing their borders, how can U S  policymakers prevent this development from destabilizing Bosnia, particularly given Milorad Dodik's threats to seek RS secession if Kosovo is "partitioned"? How can the United States encourage Croatia and Serbia to engage in Bosnia in a manner that helps bridge ethnic divisions and contributes to Bosnia's territorial integrity and sovereignty? Given the pervasiveness of corruption in Bosnia, how can U S  assistance most effectively be used to counter it? Does foreign assistance contribute to civic groups and independent media that could serve as a check against corruption? 


Report 2: In November 2011, we reported that over the previous decade, the FBI and GSA conducted a number of studies to assess the Hoover Building and its other headquarters facilities’ strategic and mission needs  Through these studies, they determined the condition of the FBI’s current assets and identified gaps between current and needed capabilities, as well as studied a range of alternatives to meet the FBI’s requirements  According to these assessments, the FBI’s headquarters facilities did not fully support the FBI’s long-term security, space, and building condition requirements  Since our report, the assessment of the Hoover Building has not materially changed  For example: Security: Since September 11, 2001, the FBI mission and workforce have expanded, and the FBI has outgrown the Hoover Building  As a result, the FBI also operates in annexes, including some located in the National Capital Region  During our 2011 review, FBI security officials told us that they have some security concerns—to varying degrees— about the Hoover Building and some of the headquarters annexes  In our report, we noted that the dispersion of staff in annexes created security challenges, particularly for at least nine annexes that were located in multitenant buildings, where some space was leased by the FBI and other space was leased by nonfederal tenants  While this arrangement did not automatically put FBI operations at risk, it heightened security concerns  In addition, in January 2017, we found that the FBI occupies space leased from foreign owners in at least six different locations, including one in Washington, D C  Further, federal officials who assess foreign investments told us at that time that leasing space in foreign-owned buildings could present security risks, such as espionage and unauthorized cyber and physical access  Space: In 2011, we reported that FBI and GSA studies showed that much of the Hoover building’s approximately 2 4 million gross square feet of space is unusable, and the remaining usable space is not designed to meet the needs of today’s FBI  Moreover, the Hoover Building’s original design is inefficient, according to GSA assessments, making it difficult to reconfigure space to promote staff collaboration  For example, in its fiscal year 2017 prospectus for the proposed FBI headquarters consolidation project, GSA noted that the Hoover Building was designed at a time when FBI operated differently, and it cannot be redeveloped to provide the necessary space to consolidate the FBI Headquarters components or to meet the agency’s current and projected operational requirements  As a result, the FBI reported facing several operational and logistical challenges  We similarly noted in our prior work in 2011 that space constraints at the Hoover Building and the resulting dispersion of staff sometimes prevented the FBI from physically locating certain types of analysts and specialists together, which in turn hampered collaboration and the performance of some classified work  Building condition: In our 2011 report, we noted that the condition of the Hoover Building was deteriorating, and GSA assessments had identified significant recapitalization needs  At that time, we found that GSA had decided to limit investments in the Hoover Building to those necessary to protect health and safety and keep building systems functioning while GSA assessed the FBI’s facility needs  We found that this decision increased the potential for building system failures and disruption to the FBI’s operations  Given that the FBI would likely remain in the building for at least several more years, we recommended that GSA evaluate its strategy to minimize major repair and recapitalization investments and take action to address any facility condition issues that could put FBI operations at risk and lead to further deterioration of the building  In 2014, in response to our recommendation, GSA evaluated its strategy for the Hoover Building and determined it needed to complete some repairs to ensure safety and maintain tenancy in the building  For example, in 2014, GSA funded contracts to waterproof portions of the building’s mezzanine level to prevent water intrusion into the building and repair the concrete facade, small sections of which had cracked and fallen from the building  In July 2017, GSA and FBI officials stated that they cancelled the procurement for the new FBI headquarters consolidation project, noting that the there was a lack of funding necessary to complete the procurement  GSA added that the cancellation of the procurement did not lessen the need for a new FBI headquarters, and that GSA and the FBI would continue to work together to address the space requirements of the FBI  In July 2014, we reported that the swap exchange approach can help GSA address the challenges of disposing of unneeded property and modernizing or replacing federal buildings  GSA officials told us that swap exchanges can help GSA facilitate construction projects given a growing need to modernize and replace federal properties, shrinking federal budgets, and challenges obtaining funding  Specifically, GSA officials noted that swap exchanges allow GSA to immediately apply the value of a federal property to be used in the exchange to construction needs, rather than attempting to obtain funds through the appropriations process  In our 2014 report, GSA officials stated that the exchanges can be attractive because the agency can get construction projects accomplished without having to request full upfront funding for them from Congress  In addition, because swap exchanges require developers or other property recipients to complete the agreed-upon GSA construction projects prior to the transfer of the title to the current property GSA is exchanging, federal agencies can continue to occupy the property during the construction process for the new project, eliminating the need for agencies to lease or acquire other space to occupy during the construction process  GSA has limited experience in successfully completing swap exchange transactions and has cancelled several recently proposed swap exchanges  More specifically, in 2016 we reported that GSA had only completed transactions using the swap exchange authority for two small (under $10-million each) swap exchanges completed in Atlanta, Georgia, in 2001 and in San Antonio, Texas, in 2012  Furthermore, GSA has faced a number of obstacles in its use of this authority  For example, for our 2014 report, we reviewed five projects identified since August 2012 in which GSA solicited market interest in exchanging almost 8-million square feet in federal property for construction services or newly constructed assets  However, GSA chose not to pursue swap-exchanges in all five of these projects, including the proposed FBI headquarters consolidation project  For example, GSA officials told us that there was little or no market interest in potential swap exchanges in Baltimore, Maryland, and Miami, Florida, and that GSA chose to pursue different approaches  Respondents to the solicitations for these two GSA swap exchanges noted that GSA did not provide important details, including the amount of investment needed in the federal properties and GSA’s specific construction needs  In addition, from 2012 to 2015, GSA pursued a larger swap exchange potentially involving up to 5 federal properties located in the Federal Triangle South area of Washington, D C , to finance construction at GSA headquarters and other federal properties  In 2013, GSA decided to focus on exchanging two buildings, the GSA Regional Office Building and the Cotton Annex, based on input from potential investors  On February 18, 2016, GSA decided to end its pursuit of the exchange, saying in a memorandum supporting this decision that private investor valuations for the two buildings fell short of the government’s estimated values  After the discontinuation of the Federal Triangle swap exchange project, we reported in 2016 that GSA officials noted they planned to improve the swap exchange process, including the property appraisal process, outreach to stakeholders to identify potential project risks for future projects, and to the extent possible, mitigate such risks  However, we also reported that several factors may continue to limit the applicability of the agency’s approach  Specifically, the viability of swap exchanges may be affected by specific market factors, such as the availability of alternative properties  In addition, the specific valuation approach used by appraisers or potential investors may reduce the viability of the swap exchange  For example, in reviewing the proposed Federal Triangle project, we found in 2016 that the proposals from two of the investment firms valued the two federal buildings involved in the proposed swap substantially less than GSA’s appraised property value  In addition, swap exchanges can require developers to spend large sums on GSA’s construction needs before receiving title to the federal property used in the exchanges  We found in 2014 that GSA’s solicitations have not always specified these construction needs in sufficient detail

ground_truth: Bosnia and Herzegovina (hereafter, "Bosnia") drew heavily on U.S. support after gaining independence from Yugoslavia in 1992. The United States helped end the Bosnian war (1992-1995), one of the most lethal conflicts in Europe since the Second World War, by leading NATO airstrikes against Bosnian Serb forces, brokering the Dayton Peace Agreement in 1995, and deploying 20,000 U.S. troops. Some Members of Congress became involved in policy debates over these measures, and Congress monitored and at times challenged the Bush and Clinton Administrations' response through numerous hearings, resolutions, and legislative proposals. Since 1995, the United States has been a major source of aid to Bosnia and firmly supports its territorial integrity. The United States also supports Bosnia's aspirations for NATO and European Union (EU) membership. Today, Bosnia faces serious challenges. Nearly 25 years after the Dayton Agreement, Bosnia continues to use part of the Agreement as its constitution, which divides the country into two ethnoterritorial entities. Critics charge that Bosnia's political system is too decentralized to enact the reforms required for NATO and EU membership. They also contend that the ethnic power-sharing arrangements and veto points embedded in numerous government bodies are sources of gridlock. Domestic and international courts have ruled against several aspects of Bosnia's constitution, yet the Bosnian government thus far has failed to implement these rulings. Since Bosnia's independence, its politics has been dominated by ethnic parties representing the country's three main groups: Bosniaks (Slavic Muslims), Croats, and Serbs. These parties have prospered under a system that critics charge lacks transparency and accountability. Critics also maintain that ethnic party leaders use divisive nationalist rhetoric to distract from serious issues affecting the country as a whole, including poverty, unemployment, and stalled political reforms. The Bosnian population exhibits low trust in political parties and the government, and disaffection toward the country's elite. U.S. and EU officials brokered several ultimately unsuccessful rounds of constitutional reform negotiations, and continue to call on Bosnia's leaders to implement reforms to make governance more efficient and effective, dismantle patronage networks, and bring Bosnia closer to EU and NATO membership. However, there is little consensus among the country's leaders on how the country should be reformed. Bosnian Serb leaders from the Serb-majority entity (Republika Srpska) have called for greater autonomy and even secession from Bosnia. Some Bosnian Croat leaders have called for partitioning Bosnia's other entity, the Federation of Bosnia and Herzegovina, to create a separate Croat-majority entity. Bosniak leaders, by contrast, generally prefer a more centralized state. Many analysts caution that any move to partition the country could lead to renewed violence, while greater decentralization could make Bosnia's government less functional. U.S. policy has long been oriented toward preserving Bosnia's statehood. Bosnia's 2018 general elections largely returned to power the same entrenched ethnic parties. Of particular concern is the election of Bosnian Serb leader Milorad Dodik to Bosnia's collective presidency. Dodik, a sharp critic of the United States and NATO, has periodically called for a referendum on Republika Srpska's secession. He is under U.S. sanctions for obstructing the Dayton Agreement. In addition to these internal challenges, U.S. and EU officials have expressed concern over external influence in the region. Russia reportedly relies on soft power, energy leverage, and "spoiler" tactics to influence Bosnia, particularly in the Serb-majority entity. Turkish soft power draws on Bosnia's Ottoman-era heritage and Turkey's shared religious tradition with Bosniaks. China is a more recent presence in the region, but its heavy investments and lending have prompted concern on both sides of the Atlantic. Policymakers have also expressed concern at the challenges posed by the return of Bosnians who fought with the Islamic State and Nusra Front in Syria and Iraq. Many observers contend that the United States remains a stakeholder in Bosnia's future because of its central role in resolving the conflict and shaping the postwar Bosnian state. Given the history of U.S. involvement in Bosnia, Bosnia's importance to regional stability in the Balkans, and concerns over Russian and Chinese influence in Bosnia, Members of Congress may be interested in monitoring how the country navigates its internal and external challenges. Congress may also consider future U.S. aid levels to Bosnia and the degree to which such assistance supports the long-standing U.S. policy objectives for Bosnia of territorial integrity, NATO and EU integration, energy security, and resilience against malign influence.

prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 2.



Report 2:  Consequently, developers may be unable to provide meaningful input, and GSA could miss swap exchange opportunities  In 2014, we recommended that GSA develop criteria for determining when to solicit market interest in a swap exchange  GSA agreed with the recommendation and has since updated its guidance to include these criteria  In January 2017, GSA agreed to a swap exchange for the U S  Department of Transportation Volpe Center in Cambridge, Massachusetts  After a competitive process, GSA selected the Massachusetts Institute of Technology (MIT) as its exchange partner for the existing Department of Transportation (DOT) facility  Per the agreement, MIT will construct a new DOT facility on a portion of a 14 acre site to which DOT has title and, in exchange, will receive title to the remaining portion of the site that will not be used by DOT, which is located near its main campus  GSA indicated that, once completed, the project will provide $750 million in value to the federal government in the form of the design and construction services and value-equalization funds from MIT  Our prior work has identified a number of alternative approaches to funding real property projects  In March 2014, we reported that upfront funding is the best way to ensure recognition of commitments made in budgeting decisions and to maintain fiscal controls  However, obtaining upfront funding for large acquisitions such as the Hoover Building replacement can be challenging  Congress has provided some agencies with specific authorities to use alternative funding mechanisms for the acquisition, renovation, or disposal of federal real property without full, upfront funding  Table 1 outlines selected funding mechanisms, and considerations for each mechanism we identified in our 2014 report  Some of these alternative mechanisms allow selected agencies to meet their real property needs by leveraging other authorized resources, such as retained fees or land swaps with a private sector partner  Funding mechanisms leverage both monetary resources, such as retained fees, and non-monetary resources, such as property exchanged in a land swap or space offered in an enhanced use lease  In some cases, the funding mechanism may function as a public-private partnership intended to further an agency’s mission by working with a partner to leverage resources  Some of these mechanisms allow the private sector to provide the project’s capital—at their cost of borrowing  The U S  federal government’s cost of borrowing is lower than the private sector’s  When the private sector provides the project capital, the federal government later repays these higher private sector borrowing costs (e g , in the form of lease payments)  In some cases, factors such as lower labor costs or fewer requirements could potentially help balance the higher cost of borrowing, making partner financing less expensive  Our 2014 report also identifies budgetary options—within the bounds of the current unified budget—to meet real property needs while helping Congress and agencies make more prudent long-term decisions  In 2014, we reported that projects with alternative funding mechanisms present multiple forms of risk that are shared between the agency and any partner or stakeholder  Further, we noted project decisions should reflect both the likely risk and the organization’s tolerance for risk  Incorporating risk assessment and management practices into decisions can help organizations recognize and prepare to manage explicit risks (e g  financial and physical) and implicit risks (e g  reputational)  For example, clearly defined lease terms may help agencies manage risks of costs for unexpected building repairs  Further considerations we noted in our 2014 report include the availability of an appropriate partner—and that partners should bring complementary resources, skills, and financial capacities to the relationship—and management of the relationship with that partner  While different funding mechanisms have been used as an alternative to obtaining upfront funding for federal real property projects, changes to the budgetary structure itself—within the bounds of the unified budget that encompasses the full scope of federal programs and transactions—may also help agencies meet their real property needs  Such alternatives may include changing existing or introducing new account structures to fund real property projects  Our previous work identified options for changes within the current discretionary budget structure and options on the mandatory side of the budget  Alternative budgetary structures may change budgetary incentives for agencies and therefore help Congress and agencies make more prudent long-term fiscal decisions  Chairman Barrasso, Ranking Member Carper, and Members of the Committee, this concludes my prepared statement  I am happy to answer any questions you may have at this time  If you or your staff members have any questions concerning this testimony, please contact me at (202) 512-2834 or wised@gao gov  In addition, contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement  Individuals who made key contributions to this testimony are Mike Armes (Assistant Director), Colin Ashwood, Matt Cook, Joseph Cruz, Keith Cunningham, Alexandra Edwards, Carol Henn, Susan Irving, Hannah Laufe, Diana Maurer, John Mortin, Monique Nasrallah, Matt Voit, Michelle Weathers, and Elizabeth Wood  This is a work of the U S  government and is not subject to copyright protection in the United States  The published product may be reproduced and distributed in its entirety without further permission from GAO  However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately 
Report 2:  banks differ substantially from a relatively small number of very large and complex banking organizations in a number of ways  Community banks tend to hold a relatively small amount of assets (although asset size alone need not be a determining factor); be more concentrated in core bank businesses of making loans and taking deposits and less involved in other, more complex activities; and operate within a smaller geographic area, making them generally more likely to practice relationship lending wherein loan officers and other bank employees have a longer standing and perhaps more personal relationship with borrowers  Therefore, community banks may serve as particularly important credit sources for local communities and underserved groups of which large banks may have little familiarity  In addition, relative to large banks, community banks generally have fewer employees, less resources to dedicate to regulatory compliance, and individually pose less of a systemic risk to the broader financial system  Congress often faces policy issue questions related to community banks  Community bank advocates often assert the tailoring of regulations currently in place does not adequately balance the benefits and costs of the regulations when applied to community banks  Concerns have also been raised about the three-decade decline in the number and market presence of these institutions, and the predominant cause of that decline is a matter of debate  In recent decades, community banks, under almost any common definition, have seen their numbers decline and their collective share of banking industry assets fall in the United States  Overall, the number of FDIC-insured institutions fell from a peak of 18,083 in 1986 to 5,477 in 2018  The number of institutions with less than $1 billion in assets fell from 17,514 to 4,704 during that time period, and the share of industry assets held by those banks fell from 37% to 7%  Meanwhile, the number of banks with more than $10 billion in assets rose from 38 to 138, and the share of total banking industry assets held by those banks increased from 28% to 84%  The decrease in the number of community banks occurred mainly through three methods: mergers, failures, and lack of new banks  Most of the decline in the number of institutions in the past 30 years was due to mergers, which averaged more than 400 a year from 1990 to 2016  Failures were minimal from 1999 to 2007, but played a larger role in the decline during the late 1980s and following the 2007-2009 financial crisis and subsequent recession  As economic conditions have improved, failures have declined, but the number of n ew r eporters —new chartered institutions providing information to the FDIC for the first time—has been extraordinarily small in recent years  For example, in the 1990s, an average of 130 new banks reported data to the FDIC per year  Through September 30, five new banks reported data to the FDIC in 2018  Observers have cited several possible causes for this industry consolidation  Some observers argue the decline indicates that the regulatory burden on community banks is too onerous, driving smaller banks to merge to create or join larger institutions, an argument covered in more detail in the following section, " Regulatory Burden on Community Banks  " However, mergers—the largest factor in consolidation—could occur for a variety of reasons  For example, a bank that is struggling financially may look to merge with a stronger bank to stay in business  Alternatively, a community bank that has been outperforming its peers may be bought by a larger bank that wants to benefit from its success  In addition, other fundamental changes besides regulatory burden in the banking system could be driving consolidation, making it difficult to isolate the effects of regulation  Through much of the 20 th century, federal and state laws restricted banks' ability to open new branches and banking across state lines was restricted  Thus, many more banks were needed to serve every community  Branching and banking across state lines was not substantially deregulated at the federal level until 1997 through the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 ( P L  103-328 )  When these restrictions were relaxed, it became easier for community banks to consolidate or for mid-size and large banks to spread operations to other markets  In addition, there may be economies of scale, not only in compliance, but in the business of banking in general  Furthermore, the economies of scale may be growing over time, which would also drive industry consolidation  For example, information technology has become more important in banking (e g , cybersecurity and mobile banking), and certain information technology systems may be subject to economies of scale  Finally, the slow growth coming out of the most recent recession, and macroeconomic conditions more generally (such as low interest rates), may make it less appealing for new firms to enter the banking market  Community banks receive special regulatory consideration to minimize their regulatory burden  For example, many regulations—including a number of regulations implemented pursuant to the Dodd-Frank Act—include exemptions for community banks or are otherwise tailored to reduce compliance costs for community banks  Title I and Title II of the EGRRCP Act contained numerous provisions that provided new exemptions to community banks or raised the thresholds for existing exemptions, such as the Community Bank Leverage Ratio and Volcker Rule exemptions discussed above in the " Prudential Regulation " section  In addition, bank regulators are required to consider the effect of rules on community banks during the rulemaking process pursuant to provisions in the Regulatory Flexibility Act ( P L  96-354 ) and the Riegle Community Development and Regulatory Improvement Act ( P L  103-325 )  Supervision is also structured to pose less of a burden on small banks than larger banks, such as by requiring less-frequent bank examinations for certain small banks and less intensive reporting requirements  However, Congress often faces questions related to whether tailoring in general or tailoring provided in specific regulations is sufficient to ensure that an appropriate trade-off has been struck between the benefits and costs of regulations facing community banks  Advocates for further regulatory relief argue that certain realized benefits are likely to be relatively small, whereas certain realized costs are likely to be relatively large  One area where the benefits of regulation may be relatively small for community banks relative to large banks is regulations aimed at improving systemic stability, because community banks individually pose less of a risk to the financial system as a whole than a large, complex, interconnected bank  Many recent banking regulations were implemented at least in part in response to the systemic nature of the 2007-2009 crisis  Some community bank proponents argue that because small banks did not cause the crisis and pose less systemic risk, they need not be subject to new regulations made in response to the crisis  Opponents of these arguments note that systemic risk is only one of the goals of regulation, along with prudential regulation and consumer protection, and that community banks are exempted from many of the regulations aimed at systemic risk  They note that hundreds of small banks failed during and after the crisis, suggesting the prudential regulation in place prior to the crisis was not stringent enough  Another potential rationale for easing regulations on community banks would be if there are economies of scale to regulatory compliance costs, meaning that regulatory compliance costs may increase as bank size does but decrease as a percentage of overall costs or revenues  Put another way, as regulatory complexity increases, compliance may become relatively more costly for small institutions  Empirical evidence on whether compliance costs are subject to economies of scale is mixed, thus consider this illustrative example to show the logic behind the argument  Imagine a bank with $100 million in assets and 25 employees and a bank with $10 billion in assets and 1,250 employees each determine they must hire an extra employee to ensure compliance with new regulations  The relative burden is larger on the small institution that expands its workforce by 4% than on the large bank that expands by less than 0 1%  From a cost-benefit perspective, if regulatory compliance costs are subject to economies of scale, then the balance of costs and benefits of a particular regulation will differ depending on the size of the bank  For the same regulatory proposal, economies of scale could potentially result in costs outweighing benefits for smaller banks  Due to a lack of empirical evidence of the exact benefits and costs of each individual regulation at each individual bank (and even lack of consensus over which banks should qualify as community banks), debates over the appropriate level of tailoring of regulations is a debate over calibration involving qualitative assessments  Where should the lines be drawn? Should exemption thresholds be set high so that regulations apply only to the very largest, most complex banks? Should thresholds be set relatively low, so that only very small banks are exempt? At what point does a bank cease to have the characteristics associated with community banks? Often at issue in this debate are the so-called regional banks —banks that are larger and operate across a greater geographic market than the community banks but are also smaller and less complex than the largest, most complex organizations with hundreds of billions or trillions of dollars in assets  Should regulators provide regional banks the same exemptions as those provided to community banks? Policymakers, in the 116 th Congress, continue to face these and other questions concerning community banks  Along with the thousands of relatively small banks operating in the United States, there are a handful of banks with hundreds of billions of dollars of assets  The 2007-2009 financial crisis highlighted the problem of "too big to fail" (TBTF) financial institutions—the concept that the failure of a large financial firm could trigger financial instability, which in several cases prompted extraordinary federal assistance to prevent the failure of certain of these institutions  In response to the crisis, policymakers took a number of steps through the Dodd-Frank Act and the Basel III Accords to eliminate the TBTF problem, including subjecting the largest banks to enhanced prudential regulations, a new resolution regime to unwind these banks in the event of failure, and higher capital requirements  This section provides background on these large banks and examines issues related to them, including reductions in the application of enhanced prudential regulations facing certain large banks made pursuant to P L  115-174 and changes to capital requirements proposed by regulators that would reduce the amount of capital certain large banks would have to hold  As regulators implement these statutory changes and their proposed rules move forward, Congress faces questions about whether relaxing these regulations appropriately eases overly stringent requirements or unnecessarily increases the likelihood that large banks take on excessive risks  Some bank holding companies (BHCs) have hundreds of billions or trillions of dollars in assets and are deeply interconnected with other financial institutions  A bank may be so large that its leadership and market participants may believe that the government would save it if it became distressed  This belief could arise from the determination that the institution is so important to the country's financial system—and that its failure would be so costly to the economy and society—that the government would feel compelled to avoid that outcome  An institution of this size and complexity is said to be TBTF  In addition to fairness issues, economic theory suggests that expectations that a firm will not be allowed to fail creates moral hazard —if the creditors and counterparties of a TBTF firm believe that the government will protect them from losses, they have less incentive to monitor the firm's riskiness because they are shielded from the negative consequences of those risks  As a result, TBTF institutions may have incentives to be excessively risky, gain unfair advantages in the market for funding, and expose taxpayers to losses  Several market forces likely drive banks and other financial institutions to grow in size and complexity, thereby potentially increasing efficiency and improving financial and economic outcomes  For example, marginal costs can be reduced through economies of scale; risk can be diversified by spreading exposures over multiple business lines and geographic markets; and a greater array of financial products could be offered to customers allowing a bank to potentially attract new customers or strengthen relationships with existing ones  These market forces and the relaxation of certain interstate banking and branching regulations described in the " Reduction in Community Banks " section may have driven some banks to become very large and complex in the years preceding the crisis  At the end of 1997, two insured depository institutions held more than $250 billion in assets, and together accounted for about 9 3% of total industry assets  By the end of 2007, six banks held more than $250 billion in assets, accounting for 40 9% of industry assets  The trend has generally continued, and as of the third quarter of 2018, nine banks held more than $250 billion in assets, accounting for 49 5% of industry assets  Many assert that the worsening of the financial crisis in fall 2008 was a demonstration of TBTF-related problems  Large institutions had taken on risks that resulted in large losses, causing the institutions to come under threat of failure  In some cases, the U S  government took actions to stabilize the financial system and individual institutions  Wachovia and Washington Mutual were large institutions that were acquired by other institutions to avoid their failure during the crisis  Bank of America and Citigroup received extraordinary assistance through the Troubled Asset Relief Program (TARP) to address financial difficulties  Other large (and small) banks participated in emergency government programs offered by the Treasury (TARP), the Federal Reserve, and the FDIC  In response, the Dodd-Frank Act attempted to end TBTF through (1) a new regulatory regime to reduce the likelihood that large banks would fail; (2) a new resolution regime to make it easier to safely wind down large bank holding companies that are at risk of failing; and (3) new restrictions on regulators' use of emergency authority to prevent "bail outs" of failing large banks  In addition, the Federal Reserve imposed additional capital requirements on the largest banks that largely aligned with proposed standards set out by the Basel III Accords, with some exceptions  To make it less likely that large banks would fail, certain large banks are now subject to an enhanced prudential regulatory regime administered by the Federal Reserve  Under this regime, large banks are subject to more stringent safety and soundness standards than other banks  They must comply with higher capital and liquidity requirements, undergo stress tests, produce living wills and capital plans, and comply with counterparty limits and risk management requirements  To make it easier to wind down complex BHCs with nonbank subsidiaries, the Dodd-Frank Act created the Orderly Liquidation Authority (OLA), a resolution regime administered by the FDIC that is similar to how the FDIC resolves bank subsidiaries  This replaced the bankruptcy process, focused on the rights of creditors, with an administrative process, focused on financial stability, for winding down such firms  To date, OLA has never been used  The Dodd-Frank Act initially applied enhanced prudential regulation requirements to all BHCs with more than $50 billion in assets, although more stringent standards were limited to banks with more than $250 billion in assets or $10 billion in foreign exposure, and the most stringent standards were limited to U S  globally systemically important banks (G-SIBs), the eight most complex U S  banks  Subsequent to the enactment of Dodd-Frank, critics of the $50 billion asset threshold argued that many banks above that size are not systemically important and that Congress should raise the threshold  In particular, critics distinguished between regional banks (which tend to be at the lower end of the asset range and, some claim, have a traditional banking business model comparable to community banks) and Wall Street banks ( a term applied to the largest, most complex organizations that tend to have significant nonbank financial activities)  Opponents of raising the threshold disputed this characterization, arguing that some regional banks are involved in sophisticated activities, such as being swap dealers, and have large off-balance-sheet exposures  In response to concerns that the enhanced prudential regulation threshold was set too low, P L  115-174 exempted banks with between $50 billion and $100 billion in assets from enhanced prudential regulation, leaving them to be regulated in general like any other bank  Under the proposed rule implementing the P L  115-174 changes, the Fed has increased the tiering of enhanced regulation for banks with more than $100 billion in assets  The proposed rule would create four categories of banks based on size and complexity, and impose increasingly stringent requirements on each category  From most to least stringent, Category I would currently include the eight G-SIBs, Category II would include one bank, Category III would include four banks, and Category IV would include 11 banks  Compared with current policy, banks in all categories would face reduced regulatory requirements under this rule, other proposed rules, and forthcoming rules required by Section 402 of P L  115-174 , if finalized  In addition, P L  115-174 created new size-based exemptions from various regulations, increasing the tendency to subject larger banks to more stringent requirements than smaller banks  These changes include exemptions from the Volcker Rule and risk-weighted capital requirements for banks with less than $10 billion in assets (meeting certain criteria)  Proponents of the changes assert they provide necessary and targeted regulatory relief  Opponents argue they needlessly pare back important Dodd-Frank protections to the benefit of large and profitable banks  As discussed in the " Capital Requirements " section, all banks must hold enough capital to meet certain capital ratio requirements  Broadly, those requirements take two forms—risk-weighted requirements and unweighted leverage requirements  In addition, a small subset of very large and very complex banks also face additional capital ratio requirements implemented by the U S  federal bank regulators  The Federal Reserve has made two proposals to simplify and relax certain aspects of these additional requirements, and these proposals are subject to debate  All banks must hold additional high-quality capital on top of the minimum required levels—called the capital conservation buffer (CCB)—to avoid limitations on their capital distributions, such as dividend payments  In addition, certain large banks are subject to the Federal Reserve's stress tests, the results of which can lead to restrictions on the bank's capital distributions  Stress tests are intended to ensure that banks hold enough capital to withstand a hypothetical market stress scenario, but arguably have the effect of acting as additional capital requirements with which banks must comply  Advanced approaches banks must maintain a fixed minimum supplementary leverage ratio (SLR), an unweighted capital requirement that is more stringent than the leverage ratio facing smaller banks because it incorporates off-balance sheet exposures  A Congressional Research Service (CRS) analysis of large holding companies' regulatory filings indicates that, currently, 19 large and complex U S  bank or thrift holding companies are classified as advanced approaches banks  G-SIBs must meet fixed enhanced SLR (eSLR) requirements, which sets the SLR higher for these banks  In addition, the G-SIBs are subject to an additional risk-weighted capital surcharge (on top of other risk-weighted capital requirements that all banks must meet) of between 1% and 4 5% based on the systemic importance of the institution  Whether these requirements are appropriately calibrated is a debated issue  Proponents of recalibrating some of these capital requirements argue that those requirements set at a fixed number—including the CCB and eSLR—are inefficient, because they do not reflect varying levels of risk posed by individual banks  Recalibration proponents also argue that compiling with these requirements in addition to stress test requirements is unnecessarily burdensome for banks  Opponents of proposals to relax current capital requirements facing large and profitable banks assert that doing so needlessly pares back important safeguards against bank failures and systemic instability  In response to concerns that fixed requirements do not adequately account for risk differences between institutions, the Fed has issued two proposals for public comment that would link individual large banks' requirements with other risk measures  One proposal would make bank CCB requirements a function of their stress tests results, and the other proposal would link large banks' eSLR requirements with individual G-SIB systemic importance scores  The Fed estimates that the new CCB requirement would generally reduce the amount of capital large banks would have to hold, but that some G-SIBs would see their required capital levels increase  The Fed estimates that the new eSLR requirement would generally reduce the amount of capital held by G-SIB parent companies by $400 million and the amount held by insured depository subsidiaries by $121 billion  To legally operate as a bank and perform the relevant activities, an institution generally must have a charter granted by either the OCC at the federal level or a state-level authority  In addition, to engage in certain activities, the institution must have federal deposit insurance granted by the FDIC  Currently, these requirements raise a number of policy questions, including whether companies established primarily as financial technology companies should be able to receive a national bank charter, as has been offered by the OCC; and whether the application process and determinations made by the FDIC as they relate to institutions seeking a specific type of state charter, called an industrial loan company (ILC) charter, is overly restrictive  An institution that makes loans and takes deposits—the core activities of traditional commercial banking—must have a government issued charter  Numerous types of charters exist, including national bank charters; state bank charters; federal savings association charters, and state savings association charters (saving associations are also referred to as thrifts )  Each charter type determines what activities are permissible for the institution, what activities are restricted, and which agency will be the institution's primary federal regulator (see Table 1 )  One of the main rationales for this system is that it gives institutions with different business models and ownership arrangements the ability to choose a regulatory regime appropriately suited to the institution's business needs and risks  The differences between institution business models and the attendant regulations are numerous, varied, and beyond the scope of this report  The issues examined in this section arise from each charter's granting an institution the right to engage in certain banking related activities, and thus generating the potential benefits and risks of those activities  Broadly, these issues relate to questions over whether companies that differ from traditional banks should be allowed to engage in traditional banking activities given the types and magnitudes of benefits and risks the companies might present  Recent advances in technology, including the proliferation of available data and internet access, have altered the way financial activities are performed in many ways  These innovations in financial technology, or fintech, have created the opportunity for certain activities that have traditionally been the business of banks to instead be performed by technology-focused, nonbank companies  Lending and payment processing are prominent examples  This development has raised questions over how these fintech companies should be regulated, and the appropriate federal and state roles in that regulation  One possible, though contested, proposal for addressing a number of these questions would be to make an OCC national bank charter available to certain fintech companies  Many nonbank fintech companies performing bank-like activities are regulated largely at the state level  They may have to obtain lending licenses or register as money transmitters in every state they operate and may be subject to the consumer protection laws of that state, such as interest rate limits  Proponents of fintech companies argue that subjecting certain technology companies to 50 different state level regulatory regimes is unnecessarily burdensome and hinders companies that hope to achieve nationwide operations quickly using the internet  In addition, a degree of uncertainty surrounding the applicability of certain laws and regulations to certain fintech firms and activities has arisen  For example, whether federal preemption of state interest rate limits apply to loans made through a marketplace lender —that is, online-only lenders that exclusively use automated, algorithmic underwriting—but originated by a bank faces legal uncertainty due to certain court decisions, including Madden v Midlands   One possible avenue to ease the state-by-state regulatory burdens and resolve the uncertainties facing some fintech firms would be to allow those firms that perform bank-like activities to apply for and (provided they meet necessary requirements) to grant them national bank charters  First proposed in 2016 by then-Comptroller of the Currency Thomas Curry, and following subsequent examination of the issue and review of public comments, the OCC announced in July 2018 that it would consider "applications for special purpose bank charters from financial technology (fintech) companies that are engaged in the business of banking but do not take deposits " OCC argues that companies with such a charter would be explicitly subject to all laws and regulations (including those that preempt state law, a contentious issue addressed below) applicable to national banks  The OCC stated that fintech firms granted the charter "will be subject to the same high standards of safety and soundness and fairness that all federally chartered banks must meet," and also that the OCC "may need to account for differences in business models and activities, risks, and the inapplicability of certain laws resulting from the uninsured status of the bank " Thus, the argument goes, establishing a fintech charter would mean a new set of innovative companies would no longer face regulatory uncertainty and could safely and efficiently provide beneficial financial services, perhaps to populations and market-niches that banks with traditional cost structures do not find cost-effective to serve  Until the OCC actually grants such charters and fintech firms operate under the national bank regime for some amount of time, how well this policy fosters potential innovations and benefits while guarding against risks is the subject of debate  Proponents of the idea generally view the charter as a mechanism for freeing companies from what they assert is the unnecessarily onerous regulatory burden of being subject to numerous state regulatory regimes  They further argue that this would be achieved without overly relaxing regulations, as the companies would become subject to the OCC's national bank regulatory regime and its rulemaking, supervisory, and enforcement authorities  Opponents generally assert both that the OCC does not have the authority to charter these types of companies, as discussed below, and that doing so would inappropriately allow marketplace lenders to circumvent important state-level consumer protections  The OCC's assertion that it has the authority to grant such charters has been challenged  Shortly after the initial 2016 announcements that the OCC was examining the possibility of granting the charters, the Conference of State Bank Supervisors and the New York State Department of Financial Services sued the OCC to prevent it from issuing the charters on the grounds that it lacked the authority to do so  A federal district court dismissed the case after concluding that because the OCC had not yet issued charters to nonbanks, the plaintiffs (1) lacked standing to challenge the OCC's purported decision to move forward with chartering nonbanks, and (2) had alleged claims that were not ripe for adjudication  Subsequent to the OCC's July 2018 announcement, state regulators have again filed lawsuits  Industrial loan companies (ILCs) hold a particular type of charter offered by some states that generally allows ILCs to engage in certain banking activities  Depending on the state, those activities can include deposit-taking, but only if they are granted deposit insurance by the FDIC  Thus, ILCs that take deposits are state regulated with the FDIC acting as the primary federal regulator  Importantly, a parent company that owns an ILC that meets certain criteria is not necessarily considered a BHC for legal and regulatory purposes  This means ILC charters create an avenue for commercial firms (i e , companies not primarily focused on the financial industry, such as manufacturers, retailers, or possibly technology companies) to own a bank  Nonfinancial parent companies of ILCs generally are not subject to Fed supervision and other regulations pursuant to the Bank Holding Company Act of 1956 (P L  84-511)  A commercial firm may want to own a bank for a number of economic reasons  For example, an ILC can provide financing to the parent company's customers and clients and thus increase sales for the parent  In recent decades, household-name manufacturers have owned ILCs, including but not limited to General Motors, Toyota, Harley Davidson, and General Electric  However, while they can generate profits and potentially increase credit availability, ILCs pose a number of potential risks  The United States has historically adopted policies to generally separate commerce and banking, because allowing a single company to be involved in both activities could potentially result in a number of bad outcomes  A mixed organization's banking subsidiary could make decisions based on the interests of the larger organization, such as making overly risky loans to customers of a commerce subsidiary or providing funding to save a failing commerce subsidiary  Such conflicts of interest could threaten the safety and soundness of the bank  Relatedly, some have argued that having a federally insured bank within a commercial organization is an inappropriate expansion of federal banking safety nets (such as deposit insurance)  Certain observers, including community banks, have concerns over whether purely commercial or purely banking organizations would be able to compete with combined organizations that could potentially use economies of scale and funding advantages to exercise market power  These arguments played a prominent role in the public debate that was sparked when Walmart and Home Depot made unsuccessful efforts to secure an ILC charter between 2005 and 2008  Amid this debate, the FDIC imposed a moratorium in 2006 on the acceptance, approval, or denial of ILC applications for deposit insurance while the agency reexamined its policies related to these companies  That moratorium ended in January 2008  Subsequently, concerns over ILCs led Congress to mandate another moratorium (this one lasting three years, ending in July 2013) on granting new ILCs deposit insurance in the Dodd-Frank Act  No consensus has been reached on the magnitude of these risks and validity of the concerns surrounding deposit-taking ILCs  Recently, two financial technology companies, Square and SoFi, have applied for ILC charters and renewed debates over ILCs  Even though the moratoriums on granting ILCs deposit insurance have expired, the FDIC has not approved any new ILC applications since the 2013 expiration  However, since becoming FDIC chairman in June 2018, Jelena McWilliams has made statements indicating that under her leadership the FDIC will again consider ILC applications  Given the interest in and debate surrounding this charter type, policymakers will likely examine questions over the extent to which ILCs create innovative sources of credit and financial services subject to appropriate safeguards or inadvisably allow commercial organizations to act as banks with federal safety nets while exempting them from certain bank regulation and supervision  In addition to regulation issues, market and economic conditions and trends continually affect the banking industry  This section analyzes such trends that may affect banks, including migration of financial activity from banks into nonbanks or the "shadow banking" system; increasing capabilities and market presence of financial technology or fintech; and a higher interest rate environment following a long period of extraordinarily low rates  Credit intermediation is a core banking activity and involves transforming short-term, liquid, safe liabilities into relatively long-term, illiquid, higher-risk assets  In the context of traditional banking, credit intermediation is performed by taking deposits from savers and using them to fund loans to borrowers  Nonbank institutions can also perform similar credit intermediation to banks—sometimes called shadow banking —using certain instruments such as money market mutual funds, short-term debt instruments, and securitized pools of loans  When illiquid assets are funded by liquid liabilities, an otherwise-solvent bank or nonbank might experience difficulty meeting short-term obligations without having to sell assets, possibly at "fire sale" prices  If depositors or other funding providers feel their money is not safe with an institution, many of them may withdraw their funds at the same time  Such a "run" could cause an institution to fail  Long-established government programs mitigate liquidity- and run-risk in the banking industry  The Federal Reserve is authorized to act as a "lender of last resort" for a bank experiencing liquidity problems, and the FDIC insures depositors against losses  Banks are also subject to prudential regulation—as discussed in the " Prudential Regulation " section  However, nonbank intermediation is performed without the government safety nets available to banks or the prudential regulation required of them  The lack of an explicit government safety net in shadow banking means that taxpayers are less explicitly or directly exposed to risk, but it also means that shadow banking may be more vulnerable to a panic that could trigger a financial crisis  Some argue that the increased regulatory burden placed on banks in response to the financial crisis—such as the changes in bank regulation mandated by Dodd-Frank or agreed to in Basel III—could result in a decreased role for banks in credit intermediation and an increased role for relatively lightly regulated nonbanks  Many contend the financial crisis demonstrated how risks to deposit-like financial instruments in the shadow banking sector—such as money market mutual funds and repurchase agreements—can create or exacerbate systemic distress  Money market mutual funds are deposit-like instruments that are managed with the goal of never losing principal and that investors can convert to cash on demand  Institutions can also access deposit-like funding by borrowing through short-term funding markets—such as by issuing commercial paper and entering repurchase agreements  These instruments can be continually rolled over as long as funding providers have confidence in the borrowers' solvency  During the crisis, all these instruments—which investors had previously viewed as safe and unlikely to suffer losses—experienced run-like events as funding providers withdrew from markets  Moreover, nonbanks can take on exposure to long-term loans through investing in mortgage-backed securities (MBS) or other asset-backed securities (ABS)  During the crisis, as firms faced liquidity problems, the value of these assets decreased quickly, possibly in part as a result of fire sales  Since the crisis, many regulatory changes have been made related to certain money market, commercial paper, and repurchase agreement markets and practices  For example, in the United States, certain money market mutual funds now must have a floating net asset value   Among other benefits, this may signal to fund investors that a loss of principal is possible and thus reduce the likelihood that investors would "run" at the first sign of possible small losses  However, some observers are still concerned that shadow banking poses risks, because the funding of relatively long-term assets with relatively short-term liabilities will inherently introduce run-risk absent certain safeguards  As discussed above, f intech usually refers to technologies with the potential to alter the way certain financial services are performed  Banks are affected by technological developments in two ways: (1) they face choices over how much to invest in emerging technologies and to what extent they want to alter their business models in adopting technologies, and (2) they potentially face new competition from new technology-focused companies  Such technologies include online marketplace lending, crowdfunding, blockchain and distributed ledgers, and robo-advising, among many others  Certain financial innovations may create opportunities to improve social and economic outcomes, but there is also potential to create risks or unexpected financial losses  Potential benefits from fintech are greater efficiency in financial markets that creates lower prices and increased customer and small business access to financial services  These can be achieved if innovative technology replaces traditional processes that are outdated or inefficient  For example, automation may be able to replace employees, and digital technology can replace physical systems and infrastructure  Cost savings from removing inefficiencies may lead to reduced prices, making certain services affordable to new customers  Some customers who previously did not have access to services—due to such things as the lack of information about creditworthiness or geographic remoteness—could also potentially gain access  Increased accessibility may be especially beneficial to traditionally underserved groups, such as low-income, minority, and rural populations  Fintech could also create or increase risks  Many fintech products have only a brief history of operation, so it can be difficult to predict outcomes and assess risk  It is possible certain technologies may not in the end function as efficiently and accurately as intended  Also, the stated aim of a new technology is often to bring a product directly to consumers and eliminate a "middle-man " However, that middle-man could be an experienced financial institution or professional that can advise consumers on financial products and their risks  In these ways, fintech could increase the likelihood that consumers engage in a financial activity and take on risks that they do not fully understand  Policymakers debate whether (and which) innovations can be integrated into the financial system without additional regulatory or policy action  Technology in finance largely involves reducing the costs or time involved in providing existing products and services, and the existing regulatory structure was developed to address risks from these financial products and activities  Existing regulation may be able to accommodate new technologies while adequately protecting against risks  However, there are two other possibilities  One is that some regulations may be stifling beneficial innovation  Another is that existing regulation does not adequately address risks created by new technologies  Some observers argue that regulation could potentially impede the development and introduction of beneficial innovation  For example, companies incur costs to comply with regulations  In addition, companies are sometimes unsure how regulators will treat the innovation once it is brought to market  A potential solution being used in other countries is to establish a regulatory "sandbox" or "greenhouse" wherein companies that meet certain requirements work with regulators as products are brought to market under a less onerous regulatory framework  In the United States, the CFPB has recently introduced a sandbox wherein companies can experiment with disclosure forms  Some are concerned that existing regulations may not adequately address certain risks posed by new technologies  Regulatory arbitrage—conducting business in a way that circumvents unfavorable regulations—may be a concern in this area  Fintech potentially could provide an opportunity for companies to claim they are not subject to certain regulations because of a superficial difference between how they operate compared with traditional banks  Another group of issues posed by fintech relates to cybersecurity (for general issues related to cybersecurity, see the " Cybersecurity " section above)  As financial activity increasingly uses digital technology, sensitive data are generated  Data can be used to accurately assess risks and ensure customers receive the best products and services  However, data can be stolen and used inappropriately, and there are concerns over privacy issues  This raises questions over ownership and control of the data—including the rights of consumers and the responsibilities of companies in accessing and using data—and whether companies that use and collect data face appropriate cybersecurity requirements  The Federal Reserve's monetary policy response to the financial crisis, the ensuing recession, and subsequent slow economic growth was to keep interest rates unusually low for an extraordinarily long time  It accomplished this in part using unprecedented monetary policy tools such as quantitative easing —large-scale asset purchases that significantly increased the size of the Federal Reserve's balance sheet  Recently, as economic conditions improved, the Federal Reserve took steps to normalize monetary policy such as raising its target interest rate and reducing the size of its balance sheet  A rising interest rate environment—especially following an extended period of unusually low rates achieved with unprecedented monetary policy tools—is an issue for banks because they are exposed to interest rate risk   A portion of bank assets have fixed interest rates with long terms until maturity, such as mortgages, and the rates of return on these assets do not increase as current market rates do  However, many bank liabilities are short term, such as deposits, and can be repriced quickly  So although certain interest revenue being collected by banks is slow to rise, the interest costs paid out by banks can rise quickly  In addition to putting stress on net income, rising interest rates can cause the market value of fixed-rate assets to fall  Finally, banks incur an opportunity cost when resources are tied up in long-term assets with low interest rates rather than being used to make new loans at higher interest rates  The magnitude of interest rate risks should not be overstated, as rising rates can potentially increase bank profitability if they result in a greater difference between long-term rates banks receive and short-term rates they pay—referred to as net interest margin   However, thus far into the Federal Reserve interest rate normalization process, this has not materialized  During 2018, the difference between long-term rates and short-term rates has generally decreased (known as a flattening of the yield curve )  Whatever changes may occur to various interest rates in the coming months and years, banks and regulators typically recognize the importance of managing interest rate risk, carefully examine the composition of bank balance sheets, and plan for different interest rate change scenarios  While banks are well-practiced at interest rate risk management through normal economic and monetary policy cycles, managing bank risk through a period of interest rate growth could be more challenging because rates have been so low for so long and achieved through unprecedented monetary policy tools  Because rates have been low for so long, many loans made in different interest rate environments that preceded the crisis have matured  Meanwhile, all new loans made in the past 10 years were made in a low interest rate environment  This presents challenges to banks seeking to hold a mix of loans with different rates  In addition, because the Federal Reserve has used new monetary policy tools and grown its balance sheet to unprecedented levels, accurately controlling the pace of interest rate growth may be challenging  

ground_truth: GSA, which manages federal real property on behalf of other federal agencies, faces challenges in funding new construction projects due to budget constraints—including obtaining upfront funding—among other reasons. One type of transaction, called a swap exchange, enables GSA to apply the value of federal property to finance construction without relying on appropriated funds. Under such an exchange, GSA transfers the title of the unneeded property to a private investor after receiving the agreed upon construction services at another location. GSA proposed a swap exchange procurement for construction of a new FBI headquarters building in exchange for the Hoover Building and appropriations to compensate for the difference in value between the Hoover Building and the new building. GSA cancelled this procurement in July 2017 due to lack of funding. This statement addresses (1) GSA's and FBI's assessments of the Hoover Building, (2) GSA efforts to implement swap exchanges, and (3) alternative approaches to funding real property projects. It is based on GAO's body of reports on real property from 2011 to 2017, and selected updates from GSA. In November 2011, GAO reported that, according to General Services Administration (GSA) and Federal Bureau of Investigation (FBI) assessments, the FBI's headquarters building (Hoover Building) and its accompanying facilities in Washington, D.C., did not fully support the FBI's long-term security, space, and building condition requirements. Since GAO's report, the assessments have not materially changed, for example: Security: GAO's prior work noted that the dispersion of staff in annexes creates security challenges, including where some space was leased by the FBI and other space was leased by nonfederal tenants. Earlier this year, GAO reported the FBI is leasing space in D.C. from foreign owners. Space : In 2011, GAO reported that FBI and GSA studies showed that much of the Hoover Building is unusable. GSA noted in its fiscal year 2017 project prospectus for the FBI headquarters consolidation that the Hoover Building cannot be redeveloped to meet the FBI's current needs. Building Condition: In GAO's 2011 report, GAO noted that the condition of the Hoover Building was deteriorating, and GSA assessments identified significant recapitalization needs. Since GAO's report and in response to GAO's recommendation, GSA has evaluated its approach to maintaining the building and completed some repairs to ensure safety. GSA has limited experience in successfully completing swap exchange transactions and chose not to pursue several proposed swap exchanges, most recently the planned swap exchange for the Hoover Building. GSA has developed criteria for determining when to solicit market interest in a swap exchange, in response to recommendations in GAO's 2014 report. In addition, GSA officials told GAO that they planned to improve the swap exchange process, including the property appraisal process, outreach to stakeholders to identify potential risks associated with future projects, and to the extent possible, mitigate such risks. Nevertheless, several factors may continue to limit use of swap exchanges, including market factors, such as the availability of alternative properties and an investor's approach for valuing properties. For example, in reviewing a proposed swap exchange in Washington, D.C., GAO found in a 2016 report that the proposals from two firms valued the two federal buildings involved in the proposed swap substantially less than GSA's appraised property value. In a 2014 report, GAO identified a number of alternative approaches to funding real property projects. Congress has provided some agencies with specific authorities to use alternative funding mechanisms—including the use of private sector funds or land swaps—for the acquisition, renovation, or disposal of federal real property without full, upfront funding, though GAO has previously reported that upfront funding is the best way to ensure recognition of commitments made in budgeting decisions and maintain fiscal controls. GAO has reported that projects with alternative funding mechanisms present multiple forms of risk that are shared between the agency and any partner or stakeholder. In addition, alternative budgetary structures could be established, such as changing existing or introducing new account structures to fund real property projects. GAO has made recommendations in the past to GSA on various real property issues, including to develop additional guidance for swap exchanges and to evaluate its approach to maintaining the Hoover Building. GSA agreed with these two recommendations and addressed them.