79–006 

115TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 115–543 

SMALL BANK HOLDING COMPANY RELIEF ACT OF 2018 

FEBRUARY 2, 2018.—Committed to the Committee of the Whole House on the State 

of the Union and ordered to be printed 

Mr. HENSARLING, from the Committee on Financial Services, 

submitted the following 

R E P O R T 

together with 

MINORITY VIEWS 

[To accompany H.R. 4771] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Financial Services, to whom was referred the 

bill (H.R. 4771) to raise the consolidated assets threshold under the 

small bank holding company policy statement, and for other purposes, having considered the same, report favorably thereon without amendment and recommend that the bill do pass. 

PURPOSE AND SUMMARY

Introduced by Representative Mia Love on January 11, 2018, 

H.R. 4771, the ‘‘Small Bank Holding Company Relief Act of 2018’’ 

requires the Board of Governors of the Federal Reserve System 

(Federal Reserve) within six months of the date of enactment, to 

revise its ‘‘Small Bank Holding Company Policy Statement on Assessment of Financial and Managerial Factors’’ (‘‘Policy Statement’’). The legislation requires the Federal Reserve to raise the 

consolidated asset threshold at which the Policy Statement applies 

from $1 billion to $3 billion. 

BACKGROUND AND NEED FOR LEGISLATION

To ensure that bank holding companies (‘‘BHCs’’) are able to 

serve as a source of strength for their insured depository subsidiaries, the Board of Governors of the Federal Reserve System (Federal Reserve) subjects them to consolidated, risk-based and leverVerDate Sep 11 2014 05:24 Feb 03, 2018 Jkt 079006 PO 00000 Frm 00001 Fmt 6659 Sfmt 6602 E:\HR\OC\HR543.XXX HR543
2 

1 12 C.F.R. part 225—appendix C. 

age capital adequacy guidelines. As part of these guidelines, the 

Federal Reserve generally discourages the use of debt by BHCs to 

finance the acquisition of banks or other companies; however, the 

Federal Reserve acknowledges that the transfer of ownership of 

small banks to small bank holding companies often requires the 

use of acquisition debt. Accordingly, in 1980, the Federal Reserve 

created an exemption for qualifying small bank holding companies 

(‘‘SBHCs’’) from the BHC capital guidelines—the Small Bank Holding Company Policy Statement (‘‘Policy Statement’’).1

The Policy Statement permits the formation and expansion of 

SBHCs with debt levels that are higher than what would be permitted for larger BHCs. The original Policy Statement issued in 

1980 set the qualifying asset threshold at $150 million. In 2006, 

the Federal Reserve increased this threshold to $500 million. On 

April 9, 2015, the Federal Reserve issued a final rule to implement 

P.L. 113–250, which required the Federal Reserve Board to raise 

the Policy Statement threshold to $1 billion. In addition to mandatory consolidated assets of less than $1 billion, a BHC that seeks to qualify as an SBHC must not: 

(1) Be engaged in significant nonbanking activities; 

(2) Conduct significant off-balance sheet activities (including 

securitization); or 

(3) Have a material amount of debt or equity securities outstanding (other than trust preferred securities) that are registered with the Securities and Exchange Commission. 

The Federal Reserve may, in its discretion, exclude any BHC, regardless of asset size, from the Policy Statement if such action is 

warranted for supervisory purposes. 

H.R. 4771 allows those BHCs that qualify as SBHCs under the 

Policy Statement to be exempt from the Federal Reserve’s riskbased capital and leverage rules. In addition, an SBHC may use 

debt to finance up to 75 percent of the purchase price of an acquisition, subject to ongoing requirements and restrictions. These restrictions include (1) not paying dividends if their debt-to-equity 

ratio exceeds 1:1; and (2) retiring all debt within 25 years and reducing debt to 30 percent or less of equity within 12 years of incurring the debt, to ensure that the higher leverage does not pose an 

undue burden on subsidiary depository institutions; (3) ensuring 

each depository institution subsidiary remain well-capitalized. 

On average the United States loses more than one community financial institution every day because of the sheer weight, volume, 

cost, complexity and uncertainty of federal regulation. As they die, 

unfortunately, so do the home ownership dreams of millions of consumers and taxpayers who want and need the customized services 

community banks and credit unions provide as they seek financial 

independence. The U.S. financial regulatory system should promote 

economic growth that not only prevents financial crises but also 

minimizes regulations that increase costs without corresponding 

benefits. 

H.R. 4771 is a targeted and focused bill that will make it easier 

for community banks to raise additional capital by issuing debt, 

providing sensible regulatory relief to small financial institutions 

while also preserving safety and soundness measures. H.R. 4771 

3 

makes it easier for community banks subject to the Policy Statement to form new holding companies, fund existing holding companies, and make acquisitions by issuing debt at the holding company 

level. 

Small bank and thrift holding companies face unique challenges 

with regard to capital formation, which is a particular concern at 

a time when the federal financial regulators are demanding higher 

capital levels in response to the Basel III capital accords. The environment in which these financial institutions operate has become 

more difficult in the past few years, with massive increases in regulatory burdens and capital requirements on top of industry consolidation and impediments to asset growth. H.R. 4771 would ease 

some of this burden and simply make it easier for institutions subject to the Policy Statement to form new holding companies, fund 

existing holding companies and make acquisitions by issuing debt 

at the holding company level. These are all important tools to ensure that our smallest financial institutions continue to lend to 

their communities, hire new loan officers and staff, and survive in 

what remains a very difficult environment for community banks. 

HEARINGS

The Committee on Financial Services held a hearing examining 

matters relating to H.R. 4771 on April 26, 2017 and April 28, 2017. 

COMMITTEE CONSIDERATION

The Committee on Financial Services met in open session on 

January 18, 2018, and ordered H.R. 4771 to be reported favorably 

to the House by a recorded vote of 41 yeas to 14 nays (Record vote 

no. FC–144), a quorum being present. 

COMMITTEE VOTES

Clause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee to list the record votes on the motion 

to report legislation and amendments thereto. The sole recorded 

vote was on a motion by Chairman Hensarling to report the bill favorably to the House with amendment. The motion was agreed to 

by a recorded vote of 41 yeas to 14 nays (Record vote no. FC–144), 

a quorum being present. 

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Insert offset folio 5 here HR543.001

Record vote no. FC-144 

Representative Yea Nay Present Representative 

Mr. Hensarling •••••••...••••• 

Mr. McHenry ...•......•.•.•••• 

Mr. King._ ................... . 

Mr. Royce (CA) •••••••.•..•••• 

Mr. Lucas •••••••.••......•••• 

Mr. Pearce •••••••....••.••••• 

Mr. Posey .................. .. 

Mr. Luetkemeyer .••••.••.••••• 

Mr. Huizenga ...•..••.•••.••• 

Mr. Duffy .................... . 

Mr. Stivers ••.••..•.......•••• 

Mr. Hultgren ..••.••••••.•.••• 

Mr. Ross •••.•..••.•••.••..••• 

Mr. Pittenger ................ . 

Mrs. Wagner ...••••••....•••• 

Mr. Barr .•••••••••..••.••.•.•• 

Mr. Rothfus •••••••••••..••••• 

Mr. Messer ••••••••••••.•...•• 

Mr. Tipton ..•••••••••••....••• 

Mr. Williams .•..••••••••.•••• 

Mr. Poliquin ................. . 

Mrs. Love •••••••..•.......••• 

Mr. Hill ...................... . 

Mr. Emmer •••••••••.•..•••••• 

Mr. Zeldin ....•••.........•••. 

Mr. Trott ••••.•••••••••••••••• 

Mr. Loudermilk ••...•••••••••• 

Mr. Mooney (WVl ••...•....•••• 

Mr. MacArthur ....••••......•• 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

K 

X 

X 

X 

X 

X 

X 

X 

K 

X 

X 

X 

X 

Mr. Davidson................. X 

Mr. Budd..................... X 

Mr. Kustoff (TNL............ .X 

Ms. Tenney····------------··· X 

Mr. Hollingsworth............. X 

Ms. Maxine Waters (CAl .•••••• 

Mrs. Carolyn B. Maloney (NY)._ 

Ms. Velazquez ••....•••••...•. 

Mr. Sherman ••..•••..•••••••• 

Mr. Meeks .•....•••.•••••..... 

Mr. Capuano ................ . 

Mr. ClaY ..................... . 

Mr. Lynch ................... . 

Mr. David Scott {GAl ......... . 

Mr. AI Green (TX) ............ . 

Mr. Cleaver ..•.•••••••..••••• 

Ms. Moore ................... . 

Mr. Ellison .................. . 

Mr. Perlmutter ............... . 

Mr. H1mes ................... . 

Mr. foster .................. .. 

Mr. Kildee ................... . 

Mr. Delaney ................. . 

Ms. Sin em a ................ .. 

Mrs. Beatty ................. . 

Mr. Heck ................... .. 

Mr. Vargas .................. . 

Mr. Gottheimer .•••••••••••... 

Mr. Gonzalez (TX) ............ . 

Mr. Cnst .................... . 

Mr. Kihuen .................. . 

Yea Nay Present 

.l\ 

X 

.l\ 

X 

.X 

.X 

.X 

X 

X 

X 

X 

.X 

X 

X 

X 

.X 

X 

X 

X 

X 

X 

X 

X 

X 

X 
5 

COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House 

of Representatives, the findings and recommendations of the Committee based on oversight activities under clause 2(b)(1) of rule X 

of the Rules of the House of Representatives, are incorporated in 

the descriptive portions of this report. 

PERFORMANCE GOALS AND OBJECTIVES

Pursuant to clause 3(c)(4) of rule XIII of the Rules of the House 

of Representatives, the Committee states that H.R. 4771 will promote the formation and expansion of small bank holding companies 

by raising the consolidated assets threshold under the Small Bank 

Holding Company Policy Statement from $1 billion to $3 billion. 

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee adopts as its own the estimate of new budget authority, entitlement authority, or tax expenditures or revenues contained in the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

CONGRESSIONAL BUDGET OFFICE ESTIMATES

Pursuant to clause 3(c)(3) of rule XIII of the Rules of the House 

of Representatives, the following is the cost estimate provided by 

the Congressional Budget Office pursuant to section 402 of the 

Congressional Budget Act of 1974: 

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, January 31, 2018. 

Hon. JEB HENSARLING, 

Chairman, Committee on Financial Services, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 4771, the Small Bank 

Holding Company Relief Act of 2018. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Sarah Puro. 

Sincerely, 

KEITH HALL, Director. 

Enclosure. 

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

H.R. 4771 would require the Federal Reserve to change its policy 

statement on the allowable level of debt at certain small bank holding companies. The current policy statement applies to bank holding companies with less than $1 billion in total consolidated assets. 

Under the bill, it would apply to bank holding companies with less 

than $3 billion in such assets. 

6 

Generally, banks with higher levels of debt have a higher probability of failing. The failure of such an institution is likely to increase direct spending by the Federal Deposit Insurance Corporation (FDIC). However, the Federal Reserve may choose not to apply 

the policy statement to any bank holding company, regardless of 

asset size, if it determines that such an action is necessary. CBO 

expects that the Federal Reserve would not allow bank holding 

companies to take on additional debt under this policy if that debt 

would jeopardize the solvency of the bank holding company and 

significantly increase the probability of failure. Further, because 

the Federal Reserve already supervises those companies, CBO expects that any changes to its administrative costs under the bill 

would be insignificant. Because increased administrative costs to 

the Federal Reserve would lower remittances to the Treasury, 

those costs are recorded in the budget as a decrease in revenues. 

Because enacting H.R. 4771 could affect direct spending and revenues, pay-as-you-go procedures apply. However, CBO estimates 

that any effects would be insignificant for each year. 

CBO estimates that enacting H.R. 4771 would not significantly 

increase net direct spending or on-budget deficits in any of the four 

consecutive 10-year periods beginning in 2028. 

H.R. 4771 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act. 

The CBO staff contacts for this estimate are Sarah Puro (for the 

FDIC) and Nathaniel Frentz (for the Federal Reserve). The estimate was approved by H. Samuel Papenfuss, Deputy Assistant Director for Budget Analysis. 

FEDERAL MANDATES STATEMENT

This information is provided in accordance with section 423 of 

the Unfunded Mandates Reform Act of 1995. 

The Committee has determined that the bill does not contain 

Federal mandates on the private sector. The Committee has determined that the bill does not impose a Federal intergovernmental 

mandate on State, local, or tribal governments. 

ADVISORY COMMITTEE STATEMENT

No advisory committees within the meaning of section 5(b) of the 

Federal Advisory Committee Act were created by this legislation. 

APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the 

terms and conditions of employment or access to public services or 

accommodations within the meaning of the section 102(b)(3) of the 

Congressional Accountability Act. 

EARMARK IDENTIFICATION

With respect to clause 9 of rule XXI of the Rules of the House 

of Representatives, the Committee has carefully reviewed the provisions of the bill and states that the provisions of the bill do not 

contain any congressional earmarks, limited tax benefits, or limited 

tariff benefits within the meaning of the rule. 

7 

DUPLICATION OF FEDERAL PROGRAMS

In compliance with clause 3(c)(5) of rule XIII of the Rules of the 

House of Representatives, the Committee states that no provision 

of the bill establishes or reauthorizes: (1) a program of the Federal 

Government known to be duplicative of another Federal program; 

(2) a program included in any report from the Government Accountability Office to Congress pursuant to section 21 of Public 

Law 111–139; or (3) a program related to a program identified in 

the most recent Catalog of Federal Domestic Assistance, published 

pursuant to the Federal Program Information Act (Pub. L. No. 95– 

220, as amended by Pub. L. No. 98–169). 

DISCLOSURE OF DIRECTED RULEMAKING

Pursuant to section 3(i) of H. Res. 5, (115th Congress), the following statement is made concerning directed rulemakings: The 

Committee states that the bill requires no directed rulemakings. 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title 

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

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

This section requires the Federal Reserve Board, within six 

months of date of enactment, to revise the Small Bank Holding 

Company Policy Statement on Assessment of Financial and Managerial Factors (12 C.F.R. part 225—appendix C) to raise the consolidated asset threshold under such policy statement from 

$1,000,000,000 to $3,000,000,000. 

This section also includes conforming amendments clarifying the 

exemption granted under the Small Bank Holding Company Policy 

Statement on Assessment of Financial and Managerial Factors 

from minimum leverage and risk-based capital requirements. 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, 

and existing law in which no change is proposed is shown in 

roman): 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, 

and existing law in which no change is proposed is shown in 

roman): 

8 

DODD-FRANK WALL STREET REFORM AND CONSUMER 

PROTECTION ACT 

* * * * * * * 

TITLE I—FINANCIAL STABILITY 

* * * * * * * 

Subtitle C—Additional Board of Governors 

Authority for Certain Nonbank Financial 

Companies and Bank Holding Companies 

* * * * * * * 

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

(a) DEFINITIONS.—For purposes of this section, the following definitions shall apply: 

(1) GENERALLY APPLICABLE LEVERAGE CAPITAL REQUIRE- MENTS.—The term ‘‘generally applicable leverage capital requirements’’ means— 

(A) the minimum ratios of tier 1 capital to average total 

assets, as established by the appropriate Federal banking 

agencies to apply to insured depository institutions under 

the prompt corrective action regulations implementing section 38 of the Federal Deposit Insurance Act, regardless of 

total consolidated asset size or foreign financial exposure; 

and 

(B) includes the regulatory capital components in the numerator of that capital requirement, average total assets 

in the denominator of that capital requirement, and the required ratio of the numerator to the denominator. 

(2) GENERALLY APPLICABLE RISK-BASED CAPITAL REQUIREMENTS.—The term ‘‘generally applicable risk-based capital requirements’’ means— 

(A) the risk-based capital requirements, as established 

by the appropriate Federal banking agencies to apply to 

insured depository institutions under the prompt corrective 

action regulations implementing section 38 of the Federal 

Deposit Insurance Act, regardless of total consolidated 

asset size or foreign financial exposure; and 

(B) includes the regulatory capital components in the numerator of those capital requirements, the risk-weighted 

assets in the denominator of those capital requirements, 

and the required ratio of the numerator to the denominator. 

(3) DEFINITION OF DEPOSITORY INSTITUTION HOLDING COMPANY.—The term ‘‘depository institution holding company’’ 

means a bank holding company or a savings and loan holding 

company (as those terms are defined in section 3 of the Federal 

Deposit Insurance Act) that is organized in the United States, 

including any bank or savings and loan holding company that 

is owned or controlled by a foreign organization, but does not 

include the foreign organization. 

9 

(4) BUSINESS OF INSURANCE.—The term ‘‘business of insurance’’ has the same meaning as in section 1002(3). 

(5) PERSON REGULATED BY A STATE INSURANCE REGULATOR.— The term ‘‘person regulated by a State insurance regulator’’ 

has the same meaning as in section 1002(22). 

(6) REGULATED FOREIGN SUBSIDIARY AND REGULATED FOR- EIGN AFFILIATE.—The terms ‘‘regulated foreign subsidiary’’ and 

‘‘regulated foreign affiliate’’ mean a person engaged in the business of insurance in a foreign country that is regulated by a 

foreign insurance regulatory authority that is a member of the 

International Association of Insurance Supervisors or other 

comparable foreign insurance regulatory authority as determined by the Board of Governors following consultation with 

the State insurance regulators, including the lead State insurance commissioner (or similar State official) of the insurance 

holding company system as determined by the procedures 

within the Financial Analysis Handbook adopted by the National Association of Insurance Commissioners, where the person, or its principal United States insurance affiliate, has its 

principal place of business or is domiciled, but only to the extent that— 

(A) such person acts in its capacity as a regulated insurance entity; and 

(B) the Board of Governors does not determine that the 

capital requirements in a specific foreign jurisdiction are 

inadequate. 

(7) CAPACITY AS A REGULATED INSURANCE ENTITY.—The term 

‘‘capacity as a regulated insurance entity’’— 

(A) includes any action or activity undertaken by a person regulated by a State insurance regulator or a regulated foreign subsidiary or regulated foreign affiliate of 

such person, as those actions relate to the provision of insurance, or other activities necessary to engage in the 

business of insurance; and 

(B) does not include any action or activity, including any 

financial activity, that is not regulated by a State insurance regulator or a foreign agency or authority and subject 

to State insurance capital requirements or, in the case of 

a regulated foreign subsidiary or regulated foreign affiliate, capital requirements imposed by a foreign insurance 

regulatory authority. 

(b) MINIMUM CAPITAL REQUIREMENTS.— 

(1) MINIMUM LEVERAGE CAPITAL REQUIREMENTS.—The appropriate Federal banking agencies shall establish minimum leverage capital requirements on a consolidated basis for insured 

depository institutions, depository institution holding companies, and nonbank financial companies supervised by the 

Board of Governors. The minimum leverage capital requirements established under this paragraph shall not be less than 

the generally applicable leverage capital requirements, which 

shall serve as a floor for any capital requirements that the 

agency may require, nor quantitatively lower than the generally applicable leverage capital requirements that were in effect for insured depository institutions as of the date of enactment of this Act. 

10 

(2) MINIMUM RISK-BASED CAPITAL REQUIREMENTS.—The appropriate Federal banking agencies shall establish minimum 

risk-based capital requirements on a consolidated basis for insured depository institutions, depository institution holding 

companies, and nonbank financial companies supervised by the 

Board of Governors. The minimum risk-based capital requirements established under this paragraph shall not be less than 

the generally applicable risk-based capital requirements, which 

shall serve as a floor for any capital requirements that the 

agency may require, nor quantitatively lower than the generally applicable risk-based capital requirements that were in 

effect for insured depository institutions as of the date of enactment of this Act. 

(3) INVESTMENTS IN FINANCIAL SUBSIDIARIES.—For purposes 

of this section, investments in financial subsidiaries that insured depository institutions are required to deduct from regulatory capital under section 5136A of the Revised Statutes of 

the United States or section 46(a)(2) of the Federal Deposit Insurance Act need not be deducted from regulatory capital by 

depository institution holding companies or nonbank financial 

companies supervised by the Board of Governors, unless such 

capital deduction is required by the Board of Governors or the 

primary financial regulatory agency in the case of nonbank financial companies supervised by the Board of Governors. 

(4) EFFECTIVE DATES AND PHASE-IN PERIODS.— 

(A) DEBT OR EQUITY INSTRUMENTS ON OR AFTER MAY 19, 

2010.—For debt or equity instruments issued on or after 

May 19, 2010, by depository institution holding companies 

or by nonbank financial companies supervised by the 

Board of Governors, this section shall be deemed to have 

become effective as of May 19, 2010. 

(B) DEBT OR EQUITY INSTRUMENTS ISSUED BEFORE MAY

19, 2010.—For debt or equity instruments issued before 

May 19, 2010, by depository institution holding companies 

or by nonbank financial companies supervised by the 

Board of Governors, any regulatory capital deductions required under this section shall be phased in incrementally 

over a period of 3 years, with the phase-in period to begin 

on January 1, 2013, except as set forth in subparagraph 

(C). 

(C) DEBT OR EQUITY INSTRUMENTS OF SMALLER INSTITUTIONS.—For debt or equity instruments issued before May 

19, 2010, by depository institution holding companies with 

total consolidated assets of less than $15,000,000,000 as of 

December 31, 2009, or March 31, 2010, and by organizations that were mutual holding companies on May 19, 

2010, the capital deductions that would be required for 

other institutions under this section are not required as a 

result of this section. 

(D) DEPOSITORY INSTITUTION HOLDING COMPANIES NOT

PREVIOUSLY SUPERVISED BY THE BOARD OF GOVERNORS.— 

For any depository institution holding company that was 

not supervised by the Board of Governors as of May 19, 

2010, the requirements of this section, except as set forth 

11 

in subparagraphs (A) and (B), shall be effective 5 years 

after the date of enactment of this Act 

(E) CERTAIN BANK HOLDING COMPANY SUBSIDIARIES OF

FOREIGN BANKING ORGANIZATIONS.—For bank holding company subsidiaries of foreign banking organizations that 

have relied on Supervision and Regulation Letter SR-01-1 

issued by the Board of Governors (as in effect on May 19, 

2010), the requirements of this section, except as set forth 

in subparagraph (A), shall be effective 5 years after the 

date of enactment of this Act. 

(5) EXCEPTIONS.—This section shall not apply to— 

(A) debt or equity instruments issued to the United 

States or any agency or instrumentality thereof pursuant 

to the Emergency Economic Stabilization Act of 2008, and 

prior to October 4, 2010; 

(B) any Federal home loan bank; or 

ø(C) any bank holding company or savings and loan 

holding company having less than $1,000,000,000 in total 

consolidated assets that complies with the requirements of 

the Small Bank Holding Company Policy Statement on Assessment of Financial and Managerial Factors of the 

Board of Governors (12 CFR part 225 appendix C), as the 

requirements of such Policy Statement are amended pursuant to section 1 of an Act entitled ‘‘To enhance the ability of community financial institutions to foster economic 

growth and serve their communities, boost small businesses, increase individual savings, and for other purposes’’.¿ 

(C) any bank holding company or savings and loan holding company that is subject to the application of the Small 

Bank Holding Company Policy Statement on Assessment of 

Financial and Managerial Factors of the Board of Governors (12 C.F.R. part 225—appendix C). 

(6) STUDY AND REPORT ON SMALL INSTITUTION ACCESS TO

CAPITAL.— 

(A) STUDY REQUIRED.—The Comptroller General of the 

United States, after consultation with the Federal banking 

agencies, shall conduct a study of access to capital by 

smaller insured depository institutions. 

(B) SCOPE.—For purposes of this study required by subparagraph (A), the term ‘‘smaller insured depository institution’’ means an insured depository institution with total 

consolidated assets of $5,000,000,000 or less. 

(C) REPORT TO CONGRESS.—Not later than 18 months 

after the date of enactment of this Act, the Comptroller 

General of the United States shall submit to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House 

of Representatives a report summarizing the results of the 

study conducted under subparagraph (A), together with 

any recommendations for legislative or regulatory action 

that would enhance the access to capital of smaller insured 

depository institutions, in a manner that is consistent with 

safe and sound banking operations. 

12 

(7) CAPITAL REQUIREMENTS TO ADDRESS ACTIVITIES THAT

POSE RISKS TO THE FINANCIAL SYSTEM.— (A) IN GENERAL.—Subject to the recommendations of the 

Council, in accordance with section 120, the Federal banking agencies shall develop capital requirements applicable 

to insured depository institutions, depository institution 

holding companies, and nonbank financial companies supervised by the Board of Governors that address the risks 

that the activities of such institutions pose, not only to the 

institution engaging in the activity, but to other public and 

private stakeholders in the event of adverse performance, 

disruption, or failure of the institution or the activity. 

(B) CONTENT.—Such rules shall address, at a minimum, 

the risks arising from— 

(i) significant volumes of activity in derivatives, 

securitized products purchased and sold, financial 

guarantees purchased and sold, securities borrowing 

and lending, and repurchase agreements and reverse 

repurchase agreements; 

(ii) concentrations in assets for which the values 

presented in financial reports are based on models 

rather than historical cost or prices deriving from deep 

and liquid 2-way markets; and 

(iii) concentrations in market share for any activity 

that would substantially disrupt financial markets if 

the institution is forced to unexpectedly cease the activity. 

(c) CLARIFICATION.— (1) IN GENERAL.—In establishing the minimum leverage capital requirements and minimum risk-based capital requirements on a consolidated basis for a depository institution holding company or a nonbank financial company supervised by 

the Board of Governors as required under paragraphs (1) and 

(2) of subsection (b), the appropriate Federal banking agencies 

shall not be required to include, for any purpose of this section 

(including in any determination of consolidation), a person regulated by a State insurance regulator or a regulated foreign 

subsidiary or a regulated foreign affiliate of such person engaged in the business of insurance, to the extent that such person acts in its capacity as a regulated insurance entity. 

(2) RULE OF CONSTRUCTION ON BOARD’S AUTHORITY.—This 

subsection shall not be construed to prohibit, modify, limit, or 

otherwise supersede any other provision of Federal law that 

provides the Board of Governors authority to issue regulations 

and orders relating to capital requirements for depository institution holding companies or nonbank financial companies supervised by the Board of Governors. 

(3) RULE OF CONSTRUCTION ON ACCOUNTING PRINCIPLES.— 

(A) IN GENERAL.—A depository institution holding company or nonbank financial company supervised by the 

Board of Governors of the Federal Reserve that is also a 

person regulated by a State insurance regulator that is engaged in the business of insurance that files financial 

statements with a State insurance regulator or the National Association of Insurance Commissioners utilizing 

13 

only Statutory Accounting Principles in accordance with 

State law, shall not be required by the Board under the 

authority of this section or the authority of the Home 

Owners’ Loan Act to prepare such financial statements in 

accordance with Generally Accepted Accounting Principles. 

(B) PRESERVATION OF AUTHORITY.—Nothing in subparagraph (A) shall limit the authority of the Board under any 

other applicable provision of law to conduct any regulatory 

or supervisory activity of a depository institution holding 

company or non-bank financial company supervised by the 

Board of Governors, including the collection or reporting of 

any information on an entity or group-wide basis. Nothing 

in this paragraph shall excuse the Board from its obligations to comply with section 161(a) of the Dodd-Frank Wall 

Street Reform and Consumer Protection Act (12 U.S.C. 

5361(a)) and section 10(b)(2) of the Home Owners’ Loan 

Act (12 U.S.C. 1467a(b)(2)), as appropriate. 

* * * * * * * 

(14) 

1P.L. 113–250, H.R. 3329, 113th Congress, a bill to enhance the ability of community financial 

institutions to foster economic growth and serve their communities, boost small businesses, increase individual savings, and for other purposes, available at: https://www.congress.gov/bill/ 

113th-congress/house-bill/3329. 2 H.R 3791, 114th Congress, a bill to raise the consolidated assets threshold under the small 

bank holding company policy statement, and for other purposes, available at: https:// 

www.congress.gov/bill/114th-congress/house-bill/3791. 3Statement of Administration Policy, April 12, 2016, available at: https:// 

obamawhitehouse.archives.gov/sites/default/files/omb/legislative/sap/114/ 

saphr3791r_20160412.pdf. 

MINORITY VIEWS 

In 2014, Democrats worked with Republicans to reach a reasonable compromise to increase the threshold for the Federal Reserve’s 

Small Bank Holding Company Policy Statement (‘‘Policy Statement’’) for bank holding companies (‘‘BHCs’’) and savings and loan 

holding companies (‘‘SLHCs’’), from $500 million to $1 billion in 

total assets.1 In general, the Federal Reserve limits the debt levels 

of BHCs and SLHCs to ensure that they are able to serve as a 

source of strength for their depository subsidiary. The Policy Statement allows certain small BHCs and SLHCs to hold more debt at 

the holding company level than would otherwise be permitted by 

capital requirements if the debt is used to finance up to 75% of an 

acquisition of another bank. The 2014 law included some conditions, such as excluding any BHC or SLHC with less than $1 billion that was engaged in significant nonbanking activities, and it 

gave the Federal Reserve the ability to exclude any BHC or SLHC 

from the Policy Statement, regardless of size, ‘‘if exclusion is determined warranted for supervisory purposes.’’ 

Despite this recent bipartisan effort to double the threshold level, 

Republicans are pushing further increases without knowing the effect of the last increase. In the last Congress, the House passed a 

bill that would increase the Policy Statement threshold to $5 billion,2 which faced a veto threat from the Obama Administration.3

Last year, Republicans included a provision in H.R. 10, the Wrong 

Choice Act, to drastically raise the $1 billion threshold to $10 billion. Now that it is clear that these dangerous proposals will go nowhere, Republicans are attempting to advance H.R. 4771, the 

Small Bank Holding Company Relief Act, which would triple the 

threshold to $3 billion. 

H.R. 4771 would dramatically raise the Policy Statement threshold without giving policymakers sufficient time to evaluate the benefits and costs of the 2014 adjustment. One such potential downside could be the acceleration of industry consolidation through 

more mergers and acquisitions that leads to fewer, not more, community banks and encouraging BHCs and SLHCs to increase debt, 

which could pose safety and soundness risks. 

It is worth noting even the Trump Administration’s Department 

of the Treasury only recommended an increase in the Policy Statement threshold of $1 billion. 

15 

4See: https://www.federalreserve.gov/publications/2016-ar-supervision-and-regulation.htm. 5FDIC, ‘‘Community Banking Study,’’ (Dec. 2012), available at: https://www.fdic.gov/regulations/resources/cbi/study.html. 6 Americans for Financial Reform, ‘‘Letter to Congress: AFR Opposes A Dozen Deregulatory 

Bills Under Consideration at a House Financial Services Committee Markup,’’ available at: 

http://ourfinancialsecurity.org/2018/01/afr-opposes-dozen-deregulatory-bills-considerationhouse-financial-services-committee-markup/. For referenced FDIC report, see Stefan Jacewitz 

and Paul Kupiec, FDIC, ‘‘Community Bank Efficiency and Economies of Scale,’’ (Dec. 2012), 

available at: https://www.fdic.gov/regulations/resources/cbi/report/cbi-eff.pdf. 

According to 2016 data from the Federal Reserve, there were 3,682 BHCs and 171 SLHCs with less than $1 billion. So under the 

current $1 billion threshold, the Policy Statement applies to about 

87 percent of all BHCs and 72 percent of all SLHCs that collectively have nearly $1 trillion in assets,4 meaning a large majority 

of the industry can already benefit from the Policy Statement 

under the $1 billion threshold, including all truly small community 

financial institutions. 

Furthermore, the current $1 billion threshold seems reasonable 

given that the Federal Deposit Insurance Corporation (FDIC) conducted an exhaustive study in 2012 defining a community bank, 

which included, among other factors, a dollar threshold of less than 

$1 billion in assets.5 This point was emphasized by Americans for 

Financial Reform in a letter to the Committee, as they wrote, ‘‘A 

$3 billion limit is unjustified, as there is no evidence that community banks over $1 billion in size are currently too small to survive. 

According to a recent FDIC report, ‘While economies of scale are 

important for community banks, historical trends in the size distribution of community banks that have survived over the last 

quarter century do not suggest that economies of scale require a 

community bank to grow or merge to asset sizes larger than $1 billion’. . . . The Committee should reject HR 4771.’ ’’ 6

Tripling the Policy Statement threshold to $3 billion at this time 

is wholly unfounded. There has not been sufficient time to see what 

effect previously doubling the Policy Statement threshold to $1 billion just a few years ago really means for community banks and 

the communities they serve. Congress should examine the data and 

consider the benefits and costs before making further changes. 

For these reasons, we oppose H.R. 4771. 

MAXINE WATERS. 

KEITH ELLISON. 

MICHAEL E. CAPUANO. 

EMANUEL CLEAVER. 

CAROLYN B. MALONEY. 

DANIEL T. KILDEE. 

AL GREEN. 

GWEN MOORE. 

Æ