69–006 

114TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 114–871 

FINANCIAL STABILITY OVERSIGHT COUNCIL 

IMPROVEMENT ACT OF 2015 

DECEMBER 12, 2016.—Committed to the Committee of the Whole House on the State 

of the Union and ordered to be printed 

Mr. HENSARLING, from the Committee on Financial Services, 

submitted the following 

R E P O R T 

together with 

MINORITY VIEWS 

[To accompany H.R. 1550] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Financial Services, to whom was referred the 

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

PURPOSE AND SUMMARY

H.R. 1550 amends the Financial Stability Act of 2010 to require 

the Financial Stability Oversight Council (FSOC), when determining whether to subject a nonbank financial company to supervision by the Board of Governors of the Federal Reserve System, 

to consider the appropriateness of imposing such standards as opposed to other forms of regulation to mitigate identified risks to 

U.S. financial stability. The bill also provides for annual and periodic reevaluation of FSOC determinations, enhanced procedures for 

making additional determinations, and periodic FSOC assessments 

of the impact of its designations. 

2 

BACKGROUND AND NEED FOR LEGISLATION

Section 113 of the Dodd-Frank Act authorizes the FSOC to determine that the material financial distress of a nonbank financial 

company could pose a threat to the financial stability of the United 

States. Once the FSOC makes a determination regarding a 

nonbank financial company, the nonbank financial company becomes subject to heightened prudential supervision and regulation 

by the Fed. The FSOC is required to consider a number of factors 

when making its determination. H.R. 1550 would add an additional 

factor that the FSOC would be required to consider before designating a nonbank financial company as systemically important. 

Specifically, the FSOC would be required to consider the ‘‘appropriateness of the imposition of prudential standards as opposed to 

other forms of regulation to mitigate the identified risks.’’ 

Section 113(e) requires the FSOC to provide a nonbank financial 

company written notice of a proposed designation determination, 

including an explanation of the basis of the proposed determination. The nonbank financial company is entitled to a hearing and 

can submit written materials contesting a proposed determination. 

H.R. 1550 would require the FSOC, upon identifying a nonbank financial company as a potential threat to the financial stability of 

the United States, to provide the nonbank financial company with 

a written notice that explains with specificity the basis for identifying the company and would require a copy of the notice to be provided to the company’s primary financial regulatory agency. 

Upon receiving a notice of potential designation, a company 

would be provided an opportunity to submit written materials for 

consideration by the FSOC and meet with the FSOC to discuss the 

FSOC’s analysis. The FSOC would be required to give the nonbank 

financial company a list of the public sources of information being 

considered by the FSOC. The FSOC would then be permitted to approve a resolution that identifies with specificity any risks to the 

financial stability of the United States that the FSOC has identified relating to the nonbank financial company by a vote of at least 

2/3rds of the voting members of the FSOC (including the affirmative vote of the Treasury Secretary). The nonbank financial company’s primary financial regulatory agency would have 180 days to 

consider the risks identified in the resolution and provide a written 

response to the FSOC that includes its assessment of the risks 

identified and the degree to which they are or could be addressed 

by existing regulation and, as appropriate, issue proposed regulations or undertake other regulatory action to mitigate the identified 

risks. In addition, the nonbank financial company would be (i) permitted to meet with the FSOC to discuss the FSOC’s analysis, (ii) 

permitted to submit written materials to the FSOC, (iii) entitled to 

receive an explanation from the FSOC of how any request by the 

FSOC for information from the nonbank financial company relates 

to the potential systemic risks posed by the company; and (iv) entitled to receive written notice when the FSOC deems its evidentiary 

record to be complete. 

After following the above process, the FSOC could, by a vote of 

at least 2/3rds of the voting members of the FSOC (including the 

affirmative vote of the Treasury Secretary) make a proposed designation of a company. Prior to making a proposed designation, the 

3 

FSOC would be required to determine that any proposed regulations or other regulatory actions taken by the primary financial 

regulatory agency are insufficient to mitigate the risks identified in 

the resolution. If the FSOC makes a proposed designation, it would 

be required to provide an explanation of the specific risks to the financial stability of the United States presented by the nonbank financial company and a detailed explanation of why existing regulations are insufficient. Following a proposed designation, the 

nonbank financial company would be permitted to request a hearing before the FSOC to contest its decision and present a remediation plan to modify the company’s business, structure, or operations. If the FSOC approves the remediation plan, then the FSOC 

would monitor implementation of the plan. If the FSOC rejects the 

remediation plan, then the FSOC could vote to make a final designation. 

Section 113(d) currently requires the FSOC annually to reevaluate each determination and rescind any determination if at least 2/ 

3rds of the voting members of the FSOC (including the affirmative 

vote of the Treasury Secretary) determine that the material financial distress of the nonbank financial company could not pose a 

threat to the financial stability of the United States. H.R. 1550 

would amend this provision and require the FSOC, in connection 

with its annual review, to allow each designated company (i) an opportunity to submit written materials to contest the determination, 

(ii) provide each designated company an opportunity to meet with 

the FSOC, and (iii) provide the designated company and its primary financial regulatory agency with the reasons for the FSOC’s 

decision to maintain a designation. In addition, the FSOC would be 

required at least every five years to conduct a reevaluation of a determination and hold a vote on whether to rescind a determination. 

In connection with this five-year review, the company would be 

permitted to submit a remediation plan that would explain how the 

company could modify its business, structure, or operations. The 

FSOC would be required to consider whether the plan, if implemented, would cause the company to no longer pose a threat to the 

financial stability of the United States. 

H.R. 1550 would also require the FSOC to disclose in its annual 

report the number of nonbank financial companies from the previous year that were subject to preliminary analysis, further review, and a proposed or final determination. The FSOC would be 

required to publish information regarding its methodology for calculating any quantitative thresholds or other metrics used to identify nonbank financial companies for analysis by the FSOC. In addition, the FSOC would be required every five years to conduct a 

study of the FSOC’s determinations and comprehensively assess 

the impact of such determinations, including whether such determinations are having the intended result of improving the financial 

stability of the United States. 

In a letter of support for H.R. 1550 dated November 2, 2015, the 

Financial Services Roundtable wrote: 

[H.R. 1550] would bring greater transparency to the Financial Services Oversight Council (FSOC). The goal of 

FSOC is to identify and mitigate systemic risk. Asset managers are different than banks, however. The standards for 

assessing their risk exposures should be measured by riskVerDate Sep 11 2014 01:17 Dec 21, 2016 Jkt 069006 PO 00000 Frm 00003 Fmt 6659 Sfmt 6602 E:\HR\OC\HR871.XXX HR871
4 

related activities and not simply the amount of assets 

under management. H.R. 1550 will improve accountability 

and transparency by requiring FSOC to identify the reasons it believes a nonbank entity should be declared a Systemically Important Financial Institution (SIFI), and allow 

the entity the opportunity to ‘‘de-risk’’ before being designated. Importantly, the bill will also allow the nonbanks’ 

primary regulator to first address any identified risks. 

This common-sense approach has strong bipartisan support. 

HEARINGS

The Committee on Financial Services’ Subcommittee on Financial Institutions held a hearing examining matters relating to H.R. 

1550 on July 8, 2015. 

COMMITTEE CONSIDERATION

The Committee on Financial Services met in open session on November 3, 2015 and November 4, 2015, and ordered H.R. 1550 to 

be reported favorably to the House without amendment by a recorded vote of 44 yeas to 12 nays (recorded vote no. FC–66), a 

quorum being present. 

COMMITTEE VOTES

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

to report legislation and amendments thereto. The sole recorded 

vote was on a motion by Chairman Hensarling to report the bill favorably to the House without amendment. The motion was agreed 

to by a recorded vote of 44 yeas to 12 nays (Record vote no. FC– 

66), a quorum being present. 

5 


Insert offset folio 6 here HR871.001

Representative 

Mr. Hensarling ______________ _ 

Mr. King (NY) ----------------

Mr. Royce--------------------

Mr. lucas---------··········· 

Mr. Garrett .................. . 

Mr. Neugebauer--·······---·· 

Mr. McHenry 

Mr. Pearce .................. . 

Mr. Posey 

Mr. Fitzpatrick .............. . 

Mr. Westmoreland 

Mr. Luetkemeyer ............. . 

Mr. Huizenga {Mil ........... . 

Mr. Duffy·····---·---

Mr. Hurt (VAl ············-··· 

Mr. Stivers 

Mr. Fincher __________ __ 

Mr. Stutzman 

Mr. Mulvaney ....... . 

Mr. Hultgren ................ . 

Mr. Ross 

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

Mrs. Wagner----------------· 

Mr. Barr ................... .. 

Mr. Roth!us --------------·-·· 

Mr. Messer .................. . 

Mr. Schweikert 

Mr. Guinta .................. . 

Mr. Tipton 

Mr. Williams ________________ _ 

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

Mrs. love----·---------------

Mr. Hill 

Mr. Emmer---·---------------

Yea 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

. ~- ~-- ----

Ms. Waters (CAl---·--·-------

Mrs. Maloney (NY)------------

Ms. Velazquez _______________ _ 

Mr. Sherman·----------------

Mr. Meeks -------·---------·-

Mr. Capuano-----------------

Mr. Hinojosa---------------·· 

Mr. Clay·-------------------- Mr. Lynch _________________ _ 

Mr. David Scott (GAl ________ _ 

Mr. AI Green (TX) -·-----------

Mr. Cleaver 

Ms. Moore ----·-···--------·-

Mr. Ellison-------------------

Mr. Perlmutter ______________ _ 

Mr. Himes __________________ _ 

Mr. Carney······-···-····----

Ms. Sewell {All ............. . 

Mr. Foster--··---------······· 

Mr. Kildee ---------------···· 

Mr. Murphy (Fl) --·-----------

Mr. Delaney·---·-·---------·-

Ms. Sinema --------·-··---·--

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

Mr. Heck (WA) ----·----·-····· 

Mr. Vargas _____ ............ . 

Yea Nay Present 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

x 
6 

COMMITTEE OVERSIGHT FINDINGS

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

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

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

the descriptive portions of this report. 

PERFORMANCE GOALS AND OBJECTIVES

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

of Representatives, the Committee states that H.R. will promote accountability in the designation of systemically important nonbank 

financial institutions for Federal Reserve supervision and regulation by, among other things, reforming the process leading to designation and requiring review of whether such designations remain 

appropriate and are having their intended effect of reducing risks 

to the U.S. financial system. 

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

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

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

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

COMMITTEE COST ESTIMATE

The Committee adopts as its own the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

CONGRESSIONAL BUDGET OFFICE ESTIMATES

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

of Representatives, the following is the cost estimate provided by 

the Congressional Budget Office pursuant to section 402 of the 

Congressional Budget Act of 1974: 

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, September 15, 2016. 

Hon. JEB HENSARLING, 

Chairman, Committee on Financial Services, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 1550, the Financial Stability Oversight Council Improvement Act of 2015. 

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

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

Sincerely, 

KEITH HALL. 

Enclosure. 

7 

H.R. 1550—Financial Stability Oversight Council Improvement Act 

of 2015 

Summary: H.R. 1550 would require the Financial Stability Oversight Council (FSOC) to change the procedures by which it designates certain companies as systemically important financial institutions (SIFIs). Those procedural changes would apply only to 

SIFIs that are not banking institutions and would affect the regulatory activities of other federal financial regulators including the 

Board of Governors of the Federal Reserve. 

Based on information from FSOC and other federal financial regulators, CBO estimates that enacting the legislation would increase 

net direct spending by $73 million and increase revenues by $22 

million over the next 10 years, leading to a net increase in the deficit of $51 million over the 2017–2026 period. Some of that cost 

would be recovered from financial institutions in the years after 

2026. Pay-as-you-go procedures apply because enacting the legislation would affect direct spending and revenues. 

CBO estimates that enacting the legislation would not increase 

net direct spending or on-budget deficits by more than $5 billion 

in any of the four consecutive 10-year periods beginning in 2027. 

H.R. 1550 contains no intergovernmental mandates as defined in 

the Unfunded Mandates Reform Act (UMRA). 

CBO expects that the federal financial regulators would increase 

fees and other assessments to offset the costs of implementing the 

bill. Doing so would increase the cost of an existing private-sector 

mandate on entities required to pay those assessments. Based on 

information from the federal financial regulators, CBO estimates 

that the aggregate increase in fees and assessments would fall well 

below the annual threshold established in UMRA for private-sector 

mandates ($154 million in 2016, adjusted for inflation). 

Estimated cost to the Federal Government: The estimated budgetary effect of H.R. 1550 is shown in the following table. The costs 

of this legislation fall within budget function 370 (commerce and 

housing credit). 

By fiscal year, in millions of dollars— 

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2017– 

2021 

2017– 

2026 

NET INCREASE IN THE DEFICIT FROM CHANGES IN DIRECT SPENDING AND REVENUES 

Administrative Costs to Financial Regulators to Review and Designate Financial Institutions a ................................... 2 3 2 2 2 2 2 2 2 2 11 21 

Additional Costs to resolve Non-Bank Financial Institutions b ............................ 0 0 1 3 5 5 4 4 4 4 9 30 

Total Increase in the Deficit ............ 2 3 3 5 7 7 6 6 6 6 20 51 

Memorandum: Components of the Net Increase in the Deficit 

INCREASES IN DIRECT SPENDING 

Total Changes in Direct Spending: 

Estimated Budget Authority ............. 2 4 5 7 9 10 9 9 9 10 26 73 

Estimated Outlays ............................ 2 4 5 7 9 10 9 9 9 10 26 73 

INCREASES IN REVENUES 

Total Changes in Revenues ....................... 0 1 2 2 2 3 3 3 3 4 6 22 

Source: Congressional Budget Office. 

Notes: Amounts may not sum to totals because of rounding; FDIC = Federal Deposit Insurance Corporation. 

8 

a Administrative costs to financial regulators include costs incurred by the Federal Deposit Insurance Corporation, the Financial Stability 

Oversight Council, the Office of the Comptroller of the Currency, the National Credit Union Administration, and the Federal Reserve System. 

Costs to the Federal Reserve System reduce remittances to the Treasury (which are recorded in the budget as revenues). Administrative costs 

to the financial regulators are typically offset, over time, by assessments levied on financial industries. b Additional costs to resolve financial institutions under H.R. 1550 would be eventually offset, by increased assessments on federally insured depository institutions. Some of those increases would occur after 2026. 

Basis of estimate: The budgetary effects of the legislation would 

stem from increased administrative costs to the federal financial 

regulators and costs to resolve certain financial institutions. CBO 

estimates that provisions in the bill that would change the standards and procedures for designating systemically important financial institutions would slightly increase the probability of losses to 

the Federal Deposit Insurance Corporation (FDIC) from resolving 

possible future defaults by certain nonbank financial institutions. 

The FDIC can eventually recover its costs for resolving those defaults from assessments on the financial industry; however, CBO 

estimates that such recoveries would occur over many years, resulting in a small additional net increase in deficits over the 2017– 

2026 period. 

For this estimate, CBO assumes that the bill will be enacted 

near the end of 2016 and that spending will follow historical patterns. 

Administrative costs to financial regulators to review and designate 

financial institutions 

Enacting H.R. 1550 would change the procedures and timeline 

FSOC uses to designate nonbank financial institutions (such as insurance companies) as SIFIs. Provisions in the bill would increase 

the workload of FSOC and other financial regulators that are 

charged with designating such firms as SIFIs. Based on information from FSOC, CBO estimates that FSOC and the federal financial regulators would need to hire an additional 20 to 30 people 

(with average salaries of around $200,000) to comply with the requirements of the bill. About half of those staff would be required 

to assist with implementing new requirements associated with conducting annual reviews of nonbank financial firms and about half 

would be required to assist with reviewing and identifying firms 

that may be designated in the future. As a result, CBO estimates 

that enacting the administrative provisions of H.R. 1550, assuming 

a partial recovery of administrative costs from private entities 

(some of which are recorded as revenues in the budget), would increase budget deficits by $21 million over the 2017–2026 period. 

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

Under current law, non-bank firms that are designated as SIFIs 

are subject to enhanced prudential regulation by the Board of Governors of the Federal Reserve. Those regulations are designed to be 

similar to those imposed on banks, which typically require SIFIs to 

undergo special stress tests, develop resolution plans, and maintain 

certain levels of liquidity and loss absorbing capacity. Based on information from national credit rating agencies and from academic, 

industry, and regulatory experts, CBO concludes that the added 

capital and transparency that results from those enhanced prudential regulations improve the safety and soundness of the affected 

9 

1See, for example, Standard and Poors, ‘‘Dodd-Frank Five Years Later: The Good, the Questionable, and the Unintended,’’ July 1, 2015. 

firms.1 On balance, CBO estimates that such regulation lowers the 

FDIC’s cost of resolving insolvent firms through the Orderly Liquidation Fund by 2 percent to 3 percent, primarily because those 

measures should result in shareholders and other creditors absorbing a larger share of any losses in the event of insolvency. 

CBO expects that the revised standards and procedures in H.R. 

1550 could delay when some nonbank firms are designated as 

SIFIs and may reduce the number of firms so designated. Under 

current law, CBO estimates that enhanced prudential regulation of 

nonbank SIFIs will reduce the net losses incurred by the FDIC by 

about $150 million over the next 10 years. Based on recent trends 

in the designation process, CBO estimates that the amount of 

nonbank assets subject to enhanced regulation would be about 20 

percent smaller over the next ten years under this bill, resulting 

in additional net costs totaling $30 million over the 2017–2026 period. Most of those losses would be offset after 2026 by income to 

the FDIC from fees paid by insured depository institutions and 

large financial firms. 

Pay-As-You-Go considerations: The Statutory Pay-As-You-Go Act 

of 2010 establishes budget-reporting and enforcement procedures 

for legislation affecting direct spending or revenues. The net 

changes in outlays and revenues that are subject to those pay-asyou-go procedures are shown in the following table. 

CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 1550, AS ORDERED REPORTED BY THE 

HOUSE COMMITTEE ON FINANCIAL SERVICES ON NOVEMBER 5, 2015 

By fiscal year, in millions of dollars— 

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2016– 

2021 

2016– 

2026 

NET INCREASE IN THE DEFICIT 

Statutory Pay-As-You-Go Impact ...... 0 2 3 3 5 7 7 6 6 6 6 20 51 

Memorandum: 

Changes in Outlays .................. 0 2 4 5 7 9 10 9 9 9 10 26 73 

Changes in Revenues .............. 0 0 1 2 2 2 3 3 3 3 4 6 22 

Increase in long-term direct spending and deficits: CBO estimates that enacting the legislation would not increase net direct 

spending or on-budget deficits by more than $5 billion in any of the 

four consecutive 10-year periods beginning in 2027. 

Estimated impact on state, local, and tribal governments: H.R. 

1550 contains no intergovernmental mandates as defined in UMRA 

and would impose no costs on state, local, or tribal governments. 

Estimated impact on the private sector: CBO expects that the 

federal financial regulators would increase fees and assessments to 

offset the costs of implementing the additional regulatory activities 

required by the bill. Doing so would increase the cost of an existing 

mandate on private entities required to pay those assessments. 

Based on information from the agencies, CBO estimates that incremental cost of the mandate would amount to about $37 million 

over the 2017–2026 period and, in aggregate, would fall well below 

the annual threshold established in UMRA for private-sector mandates ($154 million in 2016, adjusted annually for inflation). 

10 

Previous estimates: On July 29, 2015, CBO transmitted a cost estimate for S. 1484, the Financial Regulatory Improvement Act of 

2015, as ordered reported by the Senate Committee on Banking, 

Housing, and Urban Affairs on June 2, 2015. Title II of that bill 

includes provisions that would modify the processing for designating nonbank SIFIs. The specific requirements in H.R. 1550 differ from those in S. 1484, but CBO estimates that the net budgetary effect of the provisions in the two bills would be similar. 

Estimate prepared by: Federal Costs: Sarah Puro and Kathleen 

Gramp; Revenues: Nathaniel Frentz; Impact on State, Local, and 

Tribal Governments: J’nell Blanco Suchy; Impact on the Private 

Sector: Logan Smith. 

Estimate approved by: Theresa Gullo, Assistant Director for 

Budget Analysis. 

FEDERAL MANDATES STATEMENT

The Committee adopts as its own the estimate of Federal mandates prepared by the Director of the Congressional Budget Office 

pursuant to section 423 of the Unfunded Mandates Reform Act. 

ADVISORY COMMITTEE STATEMENT

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

Federal Advisory Committee Act were created by this legislation. 

APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the 

terms and conditions of employment or access to public services or 

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

Congressional Accountability Act. 

EARMARK IDENTIFICATION

H.R. 1550 does not contain any congressional earmarks, limited 

tax benefits, or limited tariff benefits as defined in clause 9 of rule 

XXI. 

DUPLICATION OF FEDERAL PROGRAMS

Pursuant to section 3(g) of H. Res. 5, 114th Cong. (2015), the 

Committee states that no provision of H.R. 1550 establishes or reauthorizes a program of the Federal Government known to be duplicative of another Federal program, a program that was included 

in any report from the Government Accountability Office to Congress pursuant to section 21 of Public Law 111–139, or a program 

related to a program identified in the most recent Catalog of Federal Domestic Assistance. 

DISCLOSURE OF DIRECTED RULEMAKING

Pursuant to section 3(i) of H. Res. 5, 114th Cong. (2015), the 

Committee states that H.R. 1550 contains no directed rulemaking. 

11 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title 

This Section cites H.R. 1550 as the ‘‘Financial Stability Oversight 

Council Improvement Act of 2015’’. 

Section 2. SIFI designation process 

Amends section 113 of the Financial Stability Act of 2010 to require the FSOC to examine the impact on the U.S. financial system 

of imposing heightened prudential standards by the Federal Reserve in lieu of other regulation. 

In addition, this section directs the FSOC to reevaluate, both annually and periodically, final determinations of systemic risk regarding a nonbank financial company under supervision by the 

Federal Reserve. Where a reevaluation determines that a nonbank 

financial company no longer poses a threat to the financial stability 

of the United States, affirmed by a vote of 2/3rds of the FSOC voting membership, this bill directs FSOC to rescind the determination. 

Further, this section prescribes procedural requirements for proposed FSOC determinations and final decision-making, including: 

written notification, opportunity to submit written materials to 

FSOC as part of the initial evaluation, opportunity to meet with 

the FSOC to discuss the analysis, and disclosure of the public 

sources of information considered by the FSOC as part of its analysis. 

Finally, this section directs the FSOC every five years to study: 

(1) the impact of its determinations to subject nonbank financial 

companies to supervision by the Federal Reserve and prudential 

standards, and (2) whether such determinations have the intended 

result of improving domestic financial stability. 

Section 3. Rule of construction 

This section stipulates that this bill does not limit the powers of 

the FSOC to implement their emergency powers under section 

113(f) of the Financial Stability Act. 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

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

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

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

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

roman): 

SECTION 113 OF THE FINANCIAL STABILITY ACT OF 2010 

SEC. 113. AUTHORITY TO REQUIRE SUPERVISION AND REGULATION 

OF CERTAIN NONBANK FINANCIAL COMPANIES. 

(a) U.S. NONBANK FINANCIAL COMPANIES SUPERVISED BY THE

BOARD OF GOVERNORS.— 

(1) DETERMINATION.—The Council, on a nondelegable basis 

and by a vote of not fewer than 2⁄3 of the voting members then 

serving, including an affirmative vote by the Chairperson, may 

determine that a U.S. nonbank financial company shall be suVerDate Sep 11 2014 01:17 Dec 21, 2016 Jkt 069006 PO 00000 Frm 00011 Fmt 6659 Sfmt 6601 E:\HR\OC\HR871.XXX HR871
12 

pervised by the Board of Governors and shall be subject to prudential standards, in accordance with this title, if the Council 

determines that material financial distress at the U.S. 

nonbank financial company, or the nature, scope, size, scale, 

concentration, interconnectedness, or mix of the activities of 

the U.S. nonbank financial company, could pose a threat to the 

financial stability of the United States. 

(2) CONSIDERATIONS.—In making a determination under 

paragraph (1), the Council shall consider— 

(A) the extent of the leverage of the company; 

(B) the extent and nature of the off-balance-sheet exposures of the company; 

(C) the extent and nature of the transactions and relationships of the company with other significant nonbank financial companies and significant bank holding companies; 

(D) the importance of the company as a source of credit 

for households, businesses, and State and local governments and as a source of liquidity for the United States financial system; 

(E) the importance of the company as a source of credit 

for low-income, minority, or underserved communities, and 

the impact that the failure of such company would have on 

the availability of credit in such communities; 

(F) the extent to which assets are managed rather than 

owned by the company, and the extent to which ownership 

of assets under management is diffuse; 

(G) the nature, scope, size, scale, concentration, interconnectedness, and mix of the activities of the company; 

(H) the degree to which the company is already regulated by 1 or more primary financial regulatory agencies; 

(I) the amount and nature of the financial assets of the 

company; 

(J) the amount and types of the liabilities of the company, including the degree of reliance on short-term funding; øand¿ 

(K) the appropriateness of the imposition of prudential 

standards as opposed to other forms of regulation to mitigate the identified risks; and 

ø(K)¿ (L) any other risk-related factors that the Council 

deems appropriate. 

(b) FOREIGN NONBANK FINANCIAL COMPANIES SUPERVISED BY THE

BOARD OF GOVERNORS.— 

(1) DETERMINATION.—The Council, on a nondelegable basis 

and by a vote of not fewer than 2⁄3 of the voting members then 

serving, including an affirmative vote by the Chairperson, may 

determine that a foreign nonbank financial company shall be 

supervised by the Board of Governors and shall be subject to 

prudential standards, in accordance with this title, if the Council determines that material financial distress at the foreign 

nonbank financial company, or the nature, scope, size, scale, 

concentration, interconnectedness, or mix of the activities of 

the foreign nonbank financial company, could pose a threat to 

the financial stability of the United States. 

(2) CONSIDERATIONS.—In making a determination under 

paragraph (1), the Council shall consider— 

13 

(A) the extent of the leverage of the company; 

(B) the extent and nature of the United States related 

off-balance-sheet exposures of the company; 

(C) the extent and nature of the transactions and relationships of the company with other significant nonbank financial companies and significant bank holding companies; 

(D) the importance of the company as a source of credit 

for United States households, businesses, and State and 

local governments and as a source of liquidity for the 

United States financial system; 

(E) the importance of the company as a source of credit 

for low-income, minority, or underserved communities in 

the United States, and the impact that the failure of such 

company would have on the availability of credit in such 

communities; 

(F) the extent to which assets are managed rather than 

owned by the company and the extent to which ownership 

of assets under management is diffuse; 

(G) the nature, scope, size, scale, concentration, interconnectedness, and mix of the activities of the company; 

(H) the extent to which the company is subject to prudential standards on a consolidated basis in its home country that are administered and enforced by a comparable 

foreign supervisory authority; 

(I) the amount and nature of the United States financial 

assets of the company; 

(J) the amount and nature of the liabilities of the company used to fund activities and operations in the United 

States, including the degree of reliance on short-term funding; øand¿ 

(K) the appropriateness of the imposition of prudential 

standards as opposed to other forms of regulation to mitigate the identified risks; and 

ø(K)¿ (L) any other risk-related factors that the Council 

deems appropriate. 

(c) ANTIEVASION.— (1) DETERMINATIONS.—In order to avoid evasion of this title, 

the Council, on its own initiative or at the request of the Board 

of Governors, may determine, on a nondelegable basis and by 

a vote of not fewer than 2⁄3 of the voting members then serving, 

including an affirmative vote by the Chairperson, that— 

(A) material financial distress related to, or the nature, 

scope, size, scale, concentration, interconnectedness, or mix 

of, the financial activities conducted directly or indirectly 

by a company incorporated or organized under the laws of 

the United States or any State or the financial activities 

in the United States of a company incorporated or organized in a country other than the United States would 

pose a threat to the financial stability of the United States, 

based on consideration of the factors in subsection (a)(2) or 

(b)(2), as applicable; 

(B) the company is organized or operates in such a manner as to evade the application of this title; and 

(C) such financial activities of the company shall be supervised by the Board of Governors and subject to prudenVerDate Sep 11 2014 01:17 Dec 21, 2016 Jkt 069006 PO 00000 Frm 00013 Fmt 6659 Sfmt 6601 E:\HR\OC\HR871.XXX HR871
14 

tial standards in accordance with this title, consistent with 

paragraph (3). 

(2) REPORT.—Upon making a determination under paragraph 

(1), the Council shall submit a report to the appropriate committees of Congress detailing the reasons for making such determination. 

(3) CONSOLIDATED SUPERVISION OF ONLY FINANCIAL ACTIVI- TIES; ESTABLISHMENT OF AN INTERMEDIATE HOLDING COM- PANY.— 

(A) ESTABLISHMENT OF AN INTERMEDIATE HOLDING COM- PANY.—Upon a determination under paragraph (1), the 

company that is the subject of the determination may establish an intermediate holding company in which the financial activities of such company and its subsidiaries 

shall be conducted (other than the activities described in 

section 167(b)(2)) in compliance with any regulations or 

guidance provided by the Board of Governors. Such intermediate holding company shall be subject to the supervision of the Board of Governors and to prudential standards under this title as if the intermediate holding company were a nonbank financial company supervised by the 

Board of Governors. 

(B) ACTION OF THE BOARD OF GOVERNORS.—To facilitate 

the supervision of the financial activities subject to the determination in paragraph (1), the Board of Governors may 

require a company to establish an intermediate holding 

company, as provided for in section 167, which would be 

subject to the supervision of the Board of Governors and 

to prudential standards under this title, as if the intermediate holding company were a nonbank financial company supervised by the Board of Governors. 

(4) NOTICE AND OPPORTUNITY FOR HEARING AND FINAL DETERMINATION; JUDICIAL REVIEW.—Subsections (d) through (h) shall 

apply to determinations made by the Council pursuant to paragraph (1) in the same manner as such subsections apply to 

nonbank financial companies. 

(5) COVERED FINANCIAL ACTIVITIES.—For purposes of this 

subsection, the term ‘‘financial activities’’— 

(A) means activities that are financial in nature (as defined in section 4(k) of the Bank Holding Company Act of 

1956); 

(B) includes the ownership or control of one or more insured depository institutions; and 

(C) does not include internal financial activities conducted for the company or any affiliate thereof, including 

internal treasury, investment, and employee benefit functions. 

(6) ONLY FINANCIAL ACTIVITIES SUBJECT TO PRUDENTIAL SUPERVISION.—Nonfinancial activities of the company shall not be 

subject to supervision by the Board of Governors and prudential standards of the Board. For purposes of this Act, the financial activities that are the subject of the determination in paragraph (1) shall be subject to the same requirements as a 

nonbank financial company supervised by the Board of Governors. Nothing in this paragraph shall prohibit or limit the 

15 

authority of the Board of Governors to apply prudential standards under this title to the financial activities that are subject 

to the determination in paragraph (1). 

ø(d) REEVALUATION AND RESCISSION.—The Council shall— 

ø(1) not less frequently than annually, reevaluate each determination made under subsections (a) and (b) with respect to 

such nonbank financial company supervised by the Board of 

Governors; and 

ø(2) rescind any such determination, if the Council, by a vote 

of not fewer than 2⁄3 of the voting members then serving, including an affirmative vote by the Chairperson, determines 

that the nonbank financial company no longer meets the standards under subsection (a) or (b), as applicable. 

ø(e) NOTICE AND OPPORTUNITY FOR HEARING AND FINAL DETERMINATION.— 

ø(1) IN GENERAL.—The Council shall provide to a nonbank financial company written notice of a proposed determination of 

the Council, including an explanation of the basis of the proposed determination of the Council, that a nonbank financial 

company shall be supervised by the Board of Governors and 

shall be subject to prudential standards in accordance with 

this title. 

ø(2) HEARING.—Not later than 30 days after the date of receipt of any notice of a proposed determination under paragraph (1), the nonbank financial company may request, in 

writing, an opportunity for a written or oral hearing before the 

Council to contest the proposed determination. Upon receipt of 

a timely request, the Council shall fix a time (not later than 

30 days after the date of receipt of the request) and place at 

which such company may appear, personally or through counsel, to submit written materials (or, at the sole discretion of 

the Council, oral testimony and oral argument). 

ø(3) FINAL DETERMINATION.—Not later than 60 days after 

the date of a hearing under paragraph (2), the Council shall 

notify the nonbank financial company of the final determination of the Council, which shall contain a statement of the 

basis for the decision of the Council. 

ø(4) NO HEARING REQUESTED.—If a nonbank financial company does not make a timely request for a hearing, the Council 

shall notify the nonbank financial company, in writing, of the 

final determination of the Council under subsection (a) or (b), 

as applicable, not later than 10 days after the date by which 

the company may request a hearing under paragraph (2).¿ 

(d) REEVALUATION AND RESCISSION.— 

(1) ANNUAL REEVALUATION.—Not less frequently than annually, the Council shall reevaluate each determination made 

under subsections (a) and (b) with respect to a nonbank financial company supervised by the Board of Governors and shall— 

(A) provide written notice to the nonbank financial company being reevaluated and afford such company an opportunity to submit written materials, within such time as the 

Council determines to be appropriate (but which shall be 

not less than 30 days after the date of receipt by the company of such notice), to contest the determination, including 

materials concerning whether, in the company’s view, mateVerDate Sep 11 2014 01:17 Dec 21, 2016 Jkt 069006 PO 00000 Frm 00015 Fmt 6659 Sfmt 6603 E:\HR\OC\HR871.XXX HR871
16 

rial financial distress at the company, or the nature, scope, 

size, scale, concentration, interconnectedness, or mix of the 

activities of the company could pose a threat to the financial stability of the United States; 

(B) provide an opportunity for the nonbank financial 

company to meet with the Council to present the information described in subparagraph (A); and 

(C) if the Council does not rescind the determination, 

provide notice to the nonbank financial company, its primary financial regulatory agency and the primary financial regulatory agency of any of the company’s significant 

subsidiaries of the reasons for the Council’s decision, which 

notice shall address with specificity how the Council assessed the material factors presented by the company under 

subparagraphs (A) and (B). 

(2) PERIODIC REEVALUATION.— 

(A) REVIEW.—Every 5 years after the date of a final determination with respect to a nonbank financial company 

under subsection (a) or (b), as applicable, the nonbank financial company may submit a written request to the 

Council for a reevaluation of such determination. Upon receipt of such a request, the Council shall conduct a reevaluation of such determination and hold a vote on whether to 

rescind such determination. 

(B) PROCEDURES.—Upon receipt of a written request 

under paragraph (A), the Council shall fix a time (not earlier than 30 days after the date of receipt of the request) 

and place at which such company may appear, personally 

or through counsel, to— 

(i) submit written materials (which may include a 

plan to modify the company’s business, structure, or 

operations, which shall specify the length of the implementation period); and 

(ii) provide oral testimony and oral argument before 

the members of the Council. 

(C) TREATMENT OF PLAN.—If the company submits a plan 

in accordance with subparagraph (B)(i), the Council shall 

consider whether the plan, if implemented, would cause the 

company to no longer meet the standards for a final determination under subsection (a) or (b), as applicable. The 

Council shall provide the nonbank financial company an 

opportunity to revise the plan after consultation with the 

Council. 

(D) EXPLANATION FOR CERTAIN COMPANIES.—With respect 

to a reevaluation under this paragraph where the determination being reevaluated was made before the date of enactment of this paragraph, the nonbank financial company 

may require the Council, as part of such reevaluation, to 

explain with specificity the basis for such determination. 

(3) RESCISSION OF DETERMINATION.— (A) IN GENERAL.—If the Council, by a vote of not fewer 

than 2⁄3 of the voting members then serving, including an 

affirmative vote by the Chairperson, determines under this 

subsection that a nonbank financial company no longer 

meets the standards for a final determination under subVerDate Sep 11 2014 01:17 Dec 21, 2016 Jkt 069006 PO 00000 Frm 00016 Fmt 6659 Sfmt 6603 E:\HR\OC\HR871.XXX HR871
17 

section (a) or (b), as applicable, the Council shall rescind 

such determination. 

(B) APPROVAL OF COMPANY PLAN.—Approval by the Council of a plan submitted or revised in accordance with paragraph (2) shall require a vote of not fewer than 2⁄3 of the 

voting members then serving, including an affirmative vote 

by the Chairperson. If such plan is approved by the Council, the company shall implement the plan during the period identified in the plan, except that the Council, in its 

sole discretion and upon request from the company, may 

grant one or more extensions of the implementation period. 

After the end of the implementation period, including any 

extensions granted by the Council, the Council shall proceed to a vote as described under subparagraph (A). 

(e) REQUIREMENTS FOR PROPOSED DETERMINATION, NOTICE AND

OPPORTUNITY FOR HEARING, AND FINAL DETERMINATION.— 

(1) NOTICE OF IDENTIFICATION FOR INITIAL EVALUATION AND

OPPORTUNITY FOR VOLUNTARY SUBMISSION.—Upon identifying a 

nonbank financial company for comprehensive analysis of the 

potential for the nonbank company to pose a threat to the financial stability of the United States, the Council shall provide the 

nonbank financial company with— 

(A) written notice that explains with specificity the basis 

for so identifying the company, a copy of which shall be 

provided to the company’s primary financial regulatory 

agency; 

(B) an opportunity to submit written materials for consideration by the Council as part of the Council’s initial 

evaluation of the risk profile and characteristics of the company; 

(C) an opportunity to meet with the Council to discuss 

the Council’s analysis; and 

(D) a list of the public sources of information being considered by the Council as part of such analysis. 

(2) REQUIREMENTS BEFORE MAKING A PROPOSED DETERMINA- TION.—Before making a proposed determination with respect to 

a nonbank financial company under paragraph (3), the Council 

shall— 

(A) by a vote of not fewer than 2⁄3 of the voting members 

then serving, including an affirmative vote by the Chairperson, approve a resolution that identifies with specificity 

any risks to the financial stability of the United States the 

Council has identified relating to the nonbank financial 

company; 

(B) with respect to nonbank financial company with a 

primary financial regulatory agency, provide a copy of the 

resolution described under subparagraph (A) to the primary financial regulatory agency and provide such agency 

with at least 180 days from the receipt of the resolution 

to— 

(i) consider the risks identified in the resolution; and 

(ii) provide a written response to the Council that includes its assessment of the risks identified and the degree to which they are or could be addressed by existing regulation and, as appropriate, issue proposed regVerDate Sep 11 2014 01:17 Dec 21, 2016 Jkt 069006 PO 00000 Frm 00017 Fmt 6659 Sfmt 6603 E:\HR\OC\HR871.XXX HR871
18 

ulations or undertake other regulatory action to mitigate the identified risks; 

(C) provide the nonbank financial company with written 

notice that the Council— 

(i) is considering whether to make a proposed determination with respect to the nonbank financial company under subsection (a) or (b), as applicable, which 

notice explains with specificity the basis for the Council’s consideration, including any aspects of the company’s operations or activities that are a primary focus 

for the Council; or 

(ii) has determined not to subject the company to further review, which action shall not preclude the Council from issuing a notice to the company under subparagraph (1)(A) at a future time; and 

(D) in the case of a notice to the nonbank financial company under subparagraph (C)(i), provide the company 

with— 

(i) an opportunity to meet with the Council to discuss 

the Council’s analysis; 

(ii) an opportunity to submit written materials, within such time as the Council deems appropriate (but not 

less than 30 days after the date of receipt by the company of the notice described under clause (i)), to the 

Council to inform the Council’s consideration of the 

nonbank financial company for a proposed determination, including materials concerning the company’s 

views as to whether it satisfies the standard for determination set forth in subsection (a) or (b), as applicable; 

(iii) an explanation of how any request by the Council for information from the nonbank financial company relates to potential risks to the financial stability 

of the United States and the Council’s analysis of the 

company; 

(iv) written notice when the Council deems its evidentiary record regarding such nonbank financial company to be complete; and 

(v) an opportunity to meet with the members of the 

Council. 

(3) PROPOSED DETERMINATION.— 

(A) VOTING.—The Council may, by a vote of not fewer 

than 2⁄3 of the voting members then serving, including an 

affirmative vote by the Chairperson, propose to make a determination in accordance with the provisions of subsection 

(a) or (b), as applicable, with respect to a nonbank financial company. 

(B) DEADLINE FOR MAKING A PROPOSED DETERMINATION.—With respect to a nonbank financial company provided with a written notice under paragraph (2)(C)(i), if the 

Council does not provide the company with the written notice of a proposed determination described under paragraph (4) within the 180-day period following the date on 

which the Council notifies the company under paragraph 

(2)(C) that the evidentiary record is complete, the Council 

19 

may not make such a proposed determination with respect 

to such company unless the Council repeats the procedures 

described under paragraph (2). 

(C) REVIEW OF ACTIONS OF PRIMARY FINANCIAL REGU- LATORY AGENCY.—With respect to a nonbank financial company with a primary financial regulatory agency, the Council may not vote under subparagraph (A) to make a proposed determination unless— 

(i) the Council first determines that any proposed 

regulations or other regulatory actions taken by the primary financial regulatory agency after receipt of the 

resolution described under paragraph (2)(A) are insufficient to mitigate the risks identified in the resolution; 

(ii) the primary financial regulatory agency has notified the Council that the agency has no proposed regulations or other regulatory actions to mitigate the risks 

identified in the resolution; or 

(iii) the period allowed by the Council under paragraph (2)(B) has elapsed and the primary financial 

regulatory agency has taken no action in response to 

the resolution. 

(4) NOTICE OF PROPOSED DETERMINATION.—The Council 

shall— 

(A) provide to a nonbank financial company written notice of a proposed determination of the Council, including 

an explanation of the basis of the proposed determination 

of the Council, that a nonbank financial company shall be 

supervised by the Board of Governors and shall be subject 

to prudential standards in accordance with this title, an explanation of the specific risks to the financial stability of 

the United States presented by the nonbank financial company, and a detailed explanation of why existing regulations or other regulatory action by the company’s primary 

financial regulatory agency, if any, is insufficient to mitigate such risk; and 

(B) provide the primary financial regulatory agency of 

the nonbank financial company a copy of the nonpublic 

written explanation of the Council’s proposed determination. 

(5) HEARING.— 

(A) IN GENERAL.—Not later than 30 days after the date 

of receipt of any notice of a proposed determination under 

paragraph (4), the nonbank financial company may request, in writing, an opportunity for a written or oral hearing before the Council to contest the proposed determination, including the opportunity to present a plan to modify 

the company’s business, structure, or operations in order to 

mitigate the risks identified in the notice, and which plan 

shall also include any steps the company expects to take 

during the implementation period to mitigate such risks. 

(B) GRANT OF HEARING.—Upon receipt of a timely request, the Council shall fix a time (not earlier than 30 days 

after the date of receipt of the request) and place at which 

such company may appear, personally or through counsel, 

to— 

20 

(i) submit written materials (which may include a 

plan to modify the company’s business, structure, or 

operations); or 

(ii) provide oral testimony and oral argument to the 

members of the Council. 

(6) COUNCIL CONSIDERATION OF COMPANY PLAN.— (A) IN GENERAL.—If a nonbank financial company submits a plan in accordance with paragraph (5), the Council 

shall, prior to making a final determination— 

(i) consider whether the plan, if implemented, would 

mitigate the risks identified in the notice under paragraph (4); and 

(ii) provide the nonbank financial company an opportunity to revise the plan after consultation with the 

Council. 

(B) VOTING.—Approval by the Council of a plan submitted under paragraph (5) or revised under subparagraph 

(A)(ii) shall require a vote of not fewer than 2⁄3 of the voting 

members then serving, including an affirmative vote by the 

Chairperson. 

(C) IMPLEMENTATION OF APPROVED PLAN.—With respect 

to a nonbank financial company’s plan approved by the 

Council under subparagraph (B), the company shall have 

one year to implement the plan, except that the Council, in 

its sole discretion and upon request from the nonbank financial company, may grant one or more extensions of the 

implementation period. 

(D) OVERSIGHT OF IMPLEMENTATION.— (i) PERIODIC REPORTS.—The Council, acting through 

the Office of Financial Research, may require the submission of periodic reports from a nonbank financial 

company for the purpose of evaluating the company’s 

progress in implementing a plan approved by the 

Council under subparagraph (B). 

(ii) INSPECTIONS.—The Council may direct the primary financial regulatory agency of a nonbank financial company or its subsidiaries (or, if none, the Board 

of Governors) to inspect the company or its subsidiaries 

for the purpose of evaluating the implementation of the 

company’s plan. 

(E) AUTHORITY TO RESCIND APPROVAL.— 

(i) IN GENERAL.—During the implementation period 

described under subparagraph (C), including any extensions granted by the Council, the Council shall retain the authority to rescind its approval of the plan if 

the Council finds, by a vote of not fewer than 2⁄3 of the 

voting members then serving, including an affirmative 

vote by the Chairperson, that the company’s implementation of the plan is no longer sufficient to mitigate or 

prevent the risks identified in the resolution described 

under paragraph (2)(A). 

(ii) FINAL DETERMINATION VOTE.—The Council may 

proceed to a vote on final determination under subsection (a) or (b), as applicable, not earlier than 10 

days after providing the nonbank financial company 

21 

with written notice that the Council has rescinded the 

approval of the company’s plan pursuant to clause (i). 

(F) ACTIONS AFTER IMPLEMENTATION.— 

(i) EVALUATION OF IMPLEMENTATION.—After the end 

of the implementation period described under subparagraph (C), including any extensions granted by the 

Council, the Council shall consider whether the plan, 

as implemented by the nonbank financial company, 

adequately mitigates or prevents the risks identified in 

the resolution described under paragraph (2)(A). 

(ii) VOTING.—If, after performing an evaluation 

under clause (i), not fewer than 2⁄3 of the voting members of the Council then serving, including an affirmative vote by the Chairperson, determine that the plan, 

as implemented, adequately mitigates or prevents the 

identified risks, the Council shall not make a final determination under subsection (a) or (b), as applicable, 

with respect to the nonbank financial company and 

shall notify the company of the Council’s decision to 

take no further action. 

(7) FINAL COUNCIL DECISIONS.— 

(A) IN GENERAL.—Not later than 90 days after the date 

of a hearing under paragraph (5), the Council shall notify 

the nonbank financial company of— 

(i) a final determination under subsection (a) or (b), 

as applicable; 

(ii) the Council’s approval of a plan submitted by the 

nonbank financial company under paragraph (5) or revised under paragraph (6); or 

(iii) the Council’s decision to take no further action 

with respect to the nonbank financial company. 

(B) EXPLANATORY STATEMENT.—A final determination of 

the Council, under subsection (a) or (b), shall contain a 

statement of the basis for the decision of the Council, including the reasons why the Council rejected any plan by 

the nonbank financial company submitted under paragraph (5) or revised under paragraph (6). 

(C) NOTICE TO PRIMARY FINANCIAL REGULATORY AGENCY.—In the case of a final determination under subsection 

(a) or (b), the Council shall provide the primary financial 

regulatory agency of the nonbank financial company a copy 

of the nonpublic written explanation of the Council’s final 

determination. 

(f) EMERGENCY EXCEPTION.— 

(1) IN GENERAL.—The Council may waive or modify the requirements of subsection (e) with respect to a nonbank financial company, if the Council determines, by a vote of not fewer 

than 2⁄3 of the voting members then serving, including an affirmative vote by the Chairperson, that such waiver or modification is necessary or appropriate to prevent or mitigate 

threats posed by the nonbank financial company to the financial stability of the United States. 

(2) NOTICE.—The Council shall provide notice of a waiver or 

modification under this subsection to the nonbank financial 

22 

company concerned as soon as practicable, but not later than 

24 hours after the waiver or modification is granted. 

(3) INTERNATIONAL COORDINATION.—In making a determination under paragraph (1), the Council shall consult with the 

appropriate home country supervisor, if any, of the foreign 

nonbank financial company that is being considered for such a 

determination. 

(4) OPPORTUNITY FOR HEARING.—The Council shall allow a 

nonbank financial company to request, in writing, an opportunity for a written or oral hearing before the Council to contest a waiver or modification under this subsection, not later 

than 10 days after the date of receipt of notice of the waiver 

or modification by the company. Upon receipt of a timely request, the Council shall fix a time (not later than 15 days after 

the date of receipt of the request) and place at which the 

nonbank financial company may appear, personally or through 

counsel, to submit written materials (or, at the sole discretion 

of the Council, oral testimony and oral argument). 

(5) NOTICE OF FINAL DETERMINATION.—Not later than 30 

days after the date of any hearing under paragraph (4), the 

Council shall notify the subject nonbank financial company of 

the final determination of the Council under this subsection, 

which shall contain a statement of the basis for the decision 

of the Council. 

(g) CONSULTATION.—The Council shall consult with the primary 

financial regulatory agency, if any, for each nonbank financial company or subsidiary of a nonbank financial company that is being 

considered for supervision by the Board of Governors under this 

section øbefore the Council makes any final determination¿ from 

the outset of the Council’s consideration of the company, including 

before the Council makes any proposed or final determination with 

respect to such nonbank financial company under subsection (a), 

(b), or (c). 

(h) JUDICIAL REVIEW.—If the Council makes a final determination under this section with respect to a nonbank financial company, such nonbank financial company may, not later than 30 days 

after the date of receipt of the notice of final determination under 

subsection (d)(2), (e)(3), or (f)(5), bring an action in the United 

States district court for the judicial district in which the home office of such nonbank financial company is located, or in the United 

States District Court for the District of Columbia, for an order requiring that the final determination be rescinded, and the court 

shall, upon review, dismiss such action or direct the final determination to be rescinded. Review of such an action shall be limited 

to whether the final determination made under this section was arbitrary and capricious. 

(i) INTERNATIONAL COORDINATION.—In exercising its duties under 

this title with respect to foreign nonbank financial companies, foreign-based bank holding companies, and cross-border activities and 

markets, the Council shall consult with appropriate foreign regulatory authorities, to the extent appropriate. 

(j) PUBLIC DISCLOSURE REQUIREMENT.—The Council shall— 

(1) in each case where a nonbank financial company has been 

notified that it is subject to the Council’s review and the company has publicly disclosed such fact, confirm that the nonbank 

23 

financial company is subject to the Council’s review, in response 

to a request from a third party; 

(2) upon making a final determination, publicly provide a 

written explanation of the basis for its decision with sufficient 

detail to provide the public with an understanding of the specific bases of the Council’s determination, including any assumptions related thereof, subject to the requirements of section 

112(d)(5); 

(3) include, in the annual report required by section 112, the 

number of nonbank financial companies from the previous year 

subject to preliminary analysis, further review, and subject to 

a proposed or final determination; and 

(4) within 90 days after the enactment of this subsection, publish information regarding its methodology for calculating any 

quantitative thresholds or other metrics used to identify 

nonbank financial companies for analysis by the Council. 

(k) PERIODIC ASSESSMENT OF THE IMPACT OF DESIGNATIONS.— 

(1) ASSESSMENT.—Every five years after the date of enactment of this section, the Council shall— 

(A) conduct a study of the Council’s determinations that 

nonbank financial companies shall be supervised by the 

Board of Governors and shall be subject to prudential 

standards; and 

(B) comprehensively assess the impact of such determinations on the companies for which such determinations were 

made and the wider economy, including whether such determinations are having the intended result of improving 

the financial stability of the United States. 

(2) REPORT.—Not later than 90 days after completing a study 

required under paragraph (1), the Council shall issue a report 

to the Congress that— 

(A) describes all findings and conclusions made by the 

Council in carrying out such study; and 

(B) identifies whether any of the Council’s determinations 

should be rescinded or whether related regulations or regulatory guidance should be modified, streamlined, expanded, 

or repealed. 

(24) 

MINORITY VIEWS 

H.R. 1550 represents yet another attempt to prevent the Financial Stability Oversight Council (the Council) from doing its congressionally-mandated job of preventing another financial crisis by 

bogging it and its designation process down in endless analysis and 

litigation. The Council is a regulatory body created in the DoddFrank Wall Street Reform and Consumer Protection Act for the 

purpose of identifying and responding to risks to financial stability, 

as well as, eliminating expectations the government will shield 

market participants from losses. Congress specifically directed the 

Council to determine whether a U.S. nonbank financial company 

should be supervised by the Federal Reserve and subject to enhanced prudential standards if the Council concludes that financial 

distress at or the activities of the company would pose a threat to 

U.S. financial stability. 

While the Dodd-Frank Act contains guidelines for identifying systemically important institutions and activities (including the direction that the Council consider risks like leverage, off-balance sheet 

exposures, transactions and relationships with other financial companies, the impact of the company as a creditor, assets and liabilities, current regulation and supervision, and the company’s financial activities), Congress provided the Council with broad discretion 

in designating an institution, but required certain steps to ensure 

transparency and due process. For example, after making a proposed designation, the Council submits a report to the House Financial Services and Senate Banking Committees detailing the reasons for making its designation and provide notice and an explanation to the nonbank financial company. The company is given 30 

days after receipt of the notice to contest FSOC’s determination 

and an additional 30 days after a final determination to appeal the 

determination in U.S. courts. 

Pursuant to the Dodd-Frank Act, the Council established a threestage process for the designation of nonbank financial companies. 

Earlier this year following months of evaluation and engagement 

with financial companies, trade associations, nonbank financial 

companies subject to previous Council determinations, public interest groups, and Congressional stakeholders, the Council adopted 17 

changes and Supplemental Procedures designed to promote transparency related to the evaluation of nonbank financial companies. 

Generally, these changes include: informing companies earlier in 

the process that they are under review; providing the company 

with additional opportunities to engage with and present information to the Council, its staff and their regulator; and making more 

information about Council designations public. 

H.R. 1550, however, goes further merely codifying the Council’s 

changes, and instead more than doubles time it would take for the 

Council to designate a company like American International Group 

25 

or AIG. Department of the Treasury Secretary Jack Lew, the Chair 

of the Council, explained to the Committee, ‘‘A misleading case has 

been made that the Council has overstepped in its effort to protect 

the financial system. But in the five years since the Council was 

established, it has identified only four nonbank financial companies 

whose material financial distress could pose a threat to U.S. financial stability.’’ H.R. 1550 would take an already lengthy and deliberative two-year process to more than four years. Such delays 

would allow companies to avoid prudential measures intended to 

mitigate threats to our economy for the benefit of their own shareholders. Rather than merely codify the changes made earlier this 

year, H.R. 1550 seeks to by statute provide institutions that the 

markets likely conclude are ‘‘too-big-to-fail’’ with a roadmap to challenge the Council’s, as one witness described, ‘‘indefinitely.’’ 

For these reasons, we oppose this bill. 

MAXINE WATERS. 

WM. LACY CLAY. 

RUBE ́ N HINOJOSA. 

KEITH ELLISON. 

AL GREEN. 

Æ