79–006 

115TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 115–657 

SMALL BANK EXAM CYCLE IMPROVEMENT ACT OF 2018 

APRIL 26, 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 

[To accompany H.R. 5076] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Financial Services, to whom was referred the 

bill (H.R. 5076) to amend the Federal Deposit Insurance Act to extend the examination cycle for certain insured depository institutions, having considered the same, report favorably thereon with an 

amendment and recommend that the bill as amended do pass. 

The amendment is as follows: 

Add at the end the following: 

SEC. 3. GAO STUDY AND REPORT. 

Not later than 2 years after the date of enactment of this Act, the Comptroller 

General of the United States shall submit a report to the Congress on the effect of 

extending the examination cycle for qualifying institutions pursuant to section 2 of 

this Act on the ability of agencies to effectively supervise and protect the safety and 

soundness of qualifying institutions. 

PURPOSE AND SUMMARY

Introduced by Representative Claudia Tenney on February 20, 

2018, H.R. 5076, the ‘‘Small Bank Exam Cycle Improvement Act of 

2018’’ amends the Federal Deposit Insurance Act (FDIA) to increase the qualifying asset threshold for insured depository institutions eligible for 18-month on-site examination cycles from $1 million to $3 billion. 

BACKGROUND AND NEED FOR LEGISLATION

Section 10(d) of the FDIA generally provides that federal banking 

agencies must conduct a full-scope, on-site examination of each insured depository institution at least once during every 12-month 

period. As part of the examination process, federal financial reguVerDate Sep 11 2014 22:09 Apr 27, 2018 Jkt 079006 PO 00000 Frm 00001 Fmt 6659 Sfmt 6602 E:\HR\OC\HR657.XXX HR657
2 

1These safety and soundness ratings are known as CAMELS ratings. CAMELS stand for capital adequacy, asset quality, management quality, earnings, liquidity, and sensitivity to market 

risk. 

lators rate financial institutions on several criteria, including safety and soundness1 and their compliance with legal and regulatory 

requirements. Regulators also calculate capital ratios and classify 

financial institutions according to the adequacy of their capitalization. If an examination reveals that an institution is not complying 

with the law or that it is undercapitalized, the regulator will assign 

the institution unsatisfactory ratings or classifications in the institution’s examination report. The institution is then subject to penalties that are authorized or required by law, including restrictions 

on asset growth, expansion, and other activities. 

Community financial institutions argue that their compliance 

costs have gone up as they attempt to keep up with new regulations and more intrusive examinations. New regulations and higher 

compliance costs have forced small banks and credit unions to cut 

back on the services they offer to their customers. As a result, local 

banks are increasingly unable to provide consumers with the products and services that they need and want. The higher threshold 

cost of compliance programs has also accelerated the pace of industry consolidation as efficiency concerns drive financial institutions 

to merge. The Federal Reserve Bank of San Francisco, for example, 

describes its process for examinations, ‘‘During an on-site bank 

exam, supervisors gather private information, such as details on 

problem loans, with which to evaluate a bank’s financial condition 

and to monitor its compliance with laws and regulatory policies. A 

key product of such an exam is a supervisory rating of the bank’s 

overall condition, commonly referred to as a CAMELS rating.’’ 

This rating system is used by the three federal banking supervisors (the Federal Reserve, the FDIC, and the OCC) and other financial supervisory agencies to provide a convenient summary of 

bank conditions at the time of an exam. The acronym ‘‘CAMEL’’ refers to the five components of a bank’s condition that are assessed: 

Capital adequacy, Asset quality, Management, Earnings, and Liquidity. A sixth component, a bank’s Sensitivity to market risk, 

was added in 1997; hence the acronym was changed to CAMELS. 

Ratings are assigned for each component in addition to the overall 

rating of a bank’s financial condition. The ratings are assigned on 

a scale from 1 to 5. Banks with ratings of 1 or 2 are considered 

to present few, if any, supervisory concerns, while banks with ratings of 3, 4, or 5 present moderate to extreme degrees of supervisory concern. 

However, paragraph (4) of Section 10(d) of the FDIA provides 

that certain insured depository institutions may be examined every 

18 months. To qualify for this longer examination cycle: 

• The institution must be found, at its most recent examination, to be well managed and must earn a 1 (outstanding) or 

2 (good) rating under the Uniform Financial Institutions Rating System, commonly referred to as CAMELS; 

• The institution must have total assets of less than $500 

million; 

• The institution must not be currently subject to a formal 

enforcement proceeding; and 

3 

2Pub. L. 109–351. 

3Pub. L. 109–473. 

4 72 Fed. Reg. 11798 (Apr. 10, 2007). 

5https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20161212a1.pdf 

• The institution must not have undergone a change in control during the previous 12-month period. 

Congress raised the threshold for CAMELS 1-rated institutions 

from $250 million to $500 million in 2006 2, and granted agencies 

discretion to increase the threshold for 2-rated institutions in 

2007.3 In a 2007 rulemaking raising the 2-rated threshold to $500 

million, the federal banking agencies estimated that a total of 

6,670 insured depository institutions qualified for the 18-month 

exam cycle.4

In the 114th Congress, H.R. 22, the FAST Act (P.L. 114–94) included Rep. Tipton’s legislation, H.R. 1553, the Small Bank Exam 

Cycle Reform Act of 2015, which President Obama signed into law 

on December 4, 2015. H.R. 1553 increased from $500 million to $1 

billion, the total asset threshold below which an agency may apply 

an 18-month (rather than a 12-month) on-site examination cycle for 

an institution with ‘‘outstanding’’ composite ratings, and to raise, 

from not more than $100 million to not more than $200 million, the 

total asset threshold below which an agency may apply an 18- 

month examination cycle to an institution with an ‘‘outstanding’’ or 

‘‘good’’ composite rating. 

In December 2016, the federal banking agencies issued final 

rules to implement H.R. 1553 and extend the on-site exam cycle for 

banks with up to $1 billion in assets from 12 months to 18 

months.5

H.R. 5076 would raise the asset eligibility threshold for smaller, 

well-rated financial institutions—those which pose little risk—to 

qualify for extended exam cycles from $1 billion to $3 billion. As 

amended by an amendment offered by the Ranking Member, H.R. 

5076 also requires the Government Accountability Office to report 

on the effect of extending the examination cycle. 

HEARINGS

The Committee on Financial Services’ Subcommittee on Financial Institutions and Consumer Credit held a hearing examining 

matters relating to H.R. 5076 on April 6, 2017. 

COMMITTEE CONSIDERATION

The Committee on Financial Services met in open session on 

March 21, 2018, and ordered H.R. 5076 to be reported favorably by 

a recorded vote of 60 yeas to 0 nays (Record vote no. FC–168), a 

quorum being present. Before the motion to report was offered, the 

Committee adopted an amendment by Ms. Waters by voice vote. 

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 as amended. The motion was agreed to by a 

4 

recorded vote of 60 yeas to 0 nays (Record vote no. FC–168), a 

quorum being present. 

5 


Insert offset folio 5 here HR657.001
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. 5076 will reduce regulatory burden on well managed smaller depository institutions by permitting a greater number of such institutions to be 

examined by federal financial regulators once every 18 months instead of once every 12 months. 

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, April 5, 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. 5076, the Small Bank 

Exam Cycle Improvement 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. 5076—Small Bank Exam Cycle Improvement Act of 2018 

H.R. 5076 would amend the Federal Deposit Insurance Act to increase the maximum size of certain financial institutions that are 

eligible to have on-site bank examinations once every 18 months 

instead of once every 12 months. 

Current information about bank assets indicates that 600 to 700 

institutions could qualify for the change in frequency of examinaVerDate Sep 11 2014 22:09 Apr 27, 2018 Jkt 079006 PO 00000 Frm 00006 Fmt 6659 Sfmt 6602 E:\HR\OC\HR657.XXX HR657
7 

tions under H.R. 5076. Using information from the federal banking 

regulators, CBO expects that bank examiners who now conduct examinations on-site would instead generally examine the affected 

banks remotely, as would be permitted by the bill. In addition, 

CBO expects that enacting H.R. 5076 would not affect future costs 

to resolve failed financial institutions because federal regulators 

would continue to exercise oversight of the institutions and could 

impose more frequent examinations of any institution for which 

they deemed more oversight to be necessary. As a result, CBO estimates that the net budgetary effects of enacting H.R. 5076 would 

be insignificant. 

Enacting H.R. 5076 could affect direct spending by federal agencies that regulate financial institutions; therefore, pay-as-you-go 

procedures apply. However, CBO estimates that the net effect on 

direct spending would be insignificant for each year. Enacting the 

bill would not affect revenues. 

CBO estimates that enacting H.R. 5076 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. 5076 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act. 

The CBO staff contact for this estimate is Sarah Puro. The estimate was approved by H. Samuel Papenfuss, Deputy Assistant Director for Budget Analysis. 

FEDERAL MANDATES STATEMENT

This information is provided in accordance with section 423 of 

the Unfunded Mandates Reform Act of 1995. 

The Committee has determined that the bill does not contain 

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

mandate on State, local, or tribal governments. 

ADVISORY COMMITTEE STATEMENT

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

Federal Advisory Committee Act were created by this legislation. 

APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the 

terms and conditions of employment or access to public services or 

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

Congressional Accountability Act. 

EARMARK IDENTIFICATION

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

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

contain any congressional earmarks, limited tax benefits, or limited 

tariff benefits within the meaning of the rule. 

DUPLICATION OF FEDERAL PROGRAMS

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

House of Representatives, the Committee states that no provision 

8 

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 estimates that the bill requires no directed rulemakings 

within the meaning of such section. 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title 

This section cites H.R. 5076 as the ‘‘Small Bank Exam Cycle Improvement Act of 2018.’’ 

Section 2. Examination cycle 

This section amends the Federal Deposit Insurance Act to increase the asset threshold at which certain institutions qualify for 

an 18-month examination cycle. 

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 italics, 

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): 

FEDERAL DEPOSIT INSURANCE ACT 

* * * * * * * 

SEC. 10. (a) The Board of Directors shall administer the affairs 

of the Corporation fairly and impartially and without discrimination. The Board of Directors of the Corporation shall determine and 

prescribe the manner in which its obligations shall be incurred and 

its expenses allowed and paid. The Corporation shall be entitled to 

the free use of the United States mails in the same manner as the 

executive departments of the Government. The Corporation with 

the consent of any Federal Reserve bank or of any board, commission, independent establishment, or executive department of the 

Government, including any field service thereof, may avail itself of 

9 

the use of information, services, and facilities thereof in carrying 

out the provisions of this Act. 

(b) EXAMINATIONS.— (1) APPOINTMENT OF EXAMINERS AND CLAIMS AGENTS.—The 

Board of Directors shall appoint examiners and claims agents. 

(2) REGULAR EXAMINATIONS.—Any examiner appointed under 

paragraph (1) shall have power, on behalf of the Corporation, 

to examine— 

(A) any insured State nonmember bank or insured State 

branch of any foreign bank; 

(B) any depository institution which files an application 

with the Corporation to become an insured depository institution; and 

(C) any insured depository institution in default, 

whenever the Board of Directors determines an examination of 

any such depository institution is necessary. 

(3) SPECIAL EXAMINATION OF ANY INSURED DEPOSITORY INSTI- TUTION.— 

(A) IN GENERAL.—In addition to the examinations authorized under paragraph (2), any examiner appointed 

under paragraph (1) shall have power, on behalf of the 

Corporation, to make any special examination of any insured depository institution or nonbank financial company 

supervised by the Board of Governors or a bank holding 

company described in section 165(a) of the Financial Stability Act of 2010, whenever the Board of Directors determines that a special examination of any such depository 

institution is necessary to determine the condition of such 

depository institution for insurance purposes, or of such 

nonbank financial company supervised by the Board of 

Governors or bank holding company described in section 

165(a) of the Financial Stability Act of 2010, for the purpose of implementing its authority to provide for orderly 

liquidation of any such company under title II of that Act, 

provided that such authority may not be used with respect 

to any such company that is in a generally sound condition. 

(B) LIMITATION.—Before conducting a special examination of a nonbank financial company supervised by the 

Board of Governors or a bank holding company described 

in section 165(a) of the Financial Stability Act of 2010, the 

Corporation shall review any available and acceptable resolution plan that the company has submitted in accordance with section 165(d) of that Act, consistent with the 

nonbinding effect of such plan, and available reports of examination, and shall coordinate to the maximum extent 

practicable with the Board of Governors, in order to minimize duplicative or conflicting examinations. 

(4) EXAMINATION OF AFFILIATES.— (A) IN GENERAL.—In making any examination under 

paragraph (2) or (3), any examiner appointed under paragraph (1) shall have power, on behalf of the Corporation, 

to make such examinations of the affairs of any affiliate of 

any depository institution as may be necessary to disclose 

fully— 

10 

(i) the relationship between such depository institution and any such affiliate; and 

(ii) the effect of such relationship on the depository 

institution. 

(B) COMMITMENT BY FOREIGN BANKS TO ALLOW EXAMINATIONS OF AFFILIATES.—No branch or depository institution 

subsidiary of a foreign bank may become an insured depository institution unless such foreign bank submits a written binding commitment to the Board of Directors to permit any examination of any affiliate of such branch or depository institution subsidiary pursuant to subparagraph 

(A) to the extent determined by the Board of Directors to 

be necessary to carry out the purposes of this Act. 

(5) EXAMINATION OF INSURED STATE BRANCHES.—The Board 

of Directors shall— 

(A) coordinate examinations of insured State branches of 

foreign banks with examinations conducted by the Board 

of Governors of the Federal Reserve System under section 

7(c)(1) of the International Banking Act of 1978; and 

(B) to the extent possible, participate in any simultaneous examination of the United States operations of a foreign bank requested by the Board under such section. 

(6) POWER AND DUTY OF EXAMINERS.—Each examiner appointed under paragraph (1) shall— 

(A) have power to make a thorough examination of any 

insured depository institution or affiliate under paragraph 

(2), (3), (4), or (5); and 

(B) shall make a full and detailed report of condition of 

any insured depository institution or affiliate examined to 

the Corporation. 

(7) POWER OF CLAIM AGENTS.—Each claim agent appointed 

under paragraph (1) shall have power to investigate and examine all claims for insured deposits. 

(c) In connection with examinations of insured depository institutions and any State nonmember bank, savings association, or other 

institution making application to become insured depository institutions, and affiliates thereof, or with other types of investigations 

to determine compliance with applicable law and regulations, the 

appropriate Federal banking agency, or its designated representatives, are authorized to administer oaths and affirmations, and to 

examine and and to take and preserve testimony under oath as to 

any matter in respect to the affairs or ownership of any such bank 

or institution or affiliate thereof, and to exercise such other powers 

as are set forth in section 8(n) of this Act. 

(d) ANNUAL ON-SITE EXAMINATIONS OF ALL INSURED DEPOSITORY

INSTITUTIONS REQUIRED.— 

(1) IN GENERAL.—The appropriate Federal banking agency 

shall, not less than once during each 12-month period, conduct 

a full-scope, on-site examination of each insured depository institution. 

(2) EXAMINATIONS BY CORPORATION.—Paragraph (1) shall not 

apply during any 12-month period in which the Corporation 

has conducted a full-scope, on-site examination of the insured 

depository institution. 

11 

(3) STATE EXAMINATIONS ACCEPTABLE.—The examinations required by paragraph (1) may be conducted in alternate 12- 

month periods, as appropriate, if the appropriate Federal banking agency determines that an examination of the insured depository institution conducted by the State during the intervening 12-month period carries out the purpose of this subsection. 

(4) 18-MONTH RULE FOR CERTAIN SMALL INSTITUTIONS.—Paragraphs (1), (2), and (3) shall apply with ‘‘18-month’’ substituted 

for ‘‘12-month’’ if— 

(A) the insured depository institution has total assets of 

less than ø$1,000,000,000¿ $3,000,000,000; 

(B) the institution is well capitalized, as defined in section 38; 

(C) when the institution was most recently examined, it 

was found to be well managed, and its composite condition— 

(i) was found to be outstanding; or 

(ii) was found to be outstanding or good, in the case 

of an insured depository institution that has total assets of not more than $200,000,000; 

(D) the insured institution is not currently subject to a 

formal enforcement proceeding or order by the Corporation 

or the appropriate Federal banking agency; and 

(E) no person acquired control of the institution during 

the 12-month period in which a full-scope, on-site examination would be required but for this paragraph. 

(5) CERTAIN GOVERNMENT-CONTROLLED INSTITUTIONS EXEMPTED.—Paragraph (1) does not apply to— 

(A) any institution for which the Corporation is conservator; or 

(B) any bridge depository institution, none of the voting 

securities of which are owned by a person or agency other 

than the Corporation. 

(6) COORDINATED EXAMINATIONS.—To minimize the disruptive effects of examinations on the operations of insured depository institutions— 

(A) each appropriate Federal banking agency shall, to 

the extent practicable and consistent with principles of 

safety and soundness and the public interest— 

(i) coordinate examinations to be conducted by that 

agency at an insured depository institution and its affiliates; 

(ii) coordinate with the other appropriate Federal 

banking agencies in the conduct of such examinations; 

(iii) work to coordinate with the appropriate State 

bank supervisor— 

(I) the conduct of all examinations made pursuant to this subsection; and 

(II) the number, types, and frequency of reports 

required to be submitted to such agencies and supervisors by insured depository institutions, and 

the type and amount of information required to be 

included in such reports; and 

12 

(iv) use copies of reports of examinations of insured 

depository institutions made by any other Federal 

banking agency or appropriate State bank supervisor 

to eliminate duplicative requests for information; and 

(B) not later than 2 years after the date of enactment of 

the Riegle Community Development and Regulatory Improvement Act of 1994, the Federal banking agencies shall 

jointly establish and implement a system for determining 

which one of the Federal banking agencies or State bank 

supervisors shall be the lead agency responsible for managing a unified examination of each insured depository institution and its affiliates, as required by this subsection. 

(7) SEPARATE EXAMINATIONS PERMITTED.—Notwithstanding 

paragraph (6), each appropriate Federal banking agency may 

conduct a separate examination in an emergency or under 

other exigent circumstances, or when the agency believes that 

a violation of law may have occurred. 

(8) REPORT.—At the time the system provided for in paragraph (6) is established, the Federal banking agencies shall 

submit a joint report describing the system to the Committee 

on Banking, Housing, and Urban Affairs of the Senate and the 

Committee on Banking, Finance and Urban Affairs of the 

House of Representatives. Thereafter, the Federal banking 

agencies shall annually submit a joint report to the Committee 

on Banking, Housing, and Urban Affairs of the Senate and the 

Committee on Banking, Finance and Urban Affairs of the 

House of Representatives regarding the progress of the agencies in implementing the system and indicating areas in which 

enhancements to the system, including legislature improvements, would be appropriate. 

(9) STANDARDS FOR DETERMINING ADEQUACY OF STATE EXAMINATIONS.—The Federal Financial Institutions Examination 

Council shall issue guidelines establishing standards to be 

used at the discretion of the appropriate Federal banking agency for purposes of making a determination under paragraph 

(3). 

(10) AGENCIES AUTHORIZED TO INCREASE MAXIMUM ASSET

AMOUNT OF INSTITUTIONS FOR CERTAIN PURPOSES.—At any time 

after the end of the 2-year period beginning on the date of enactment of the Riegle Community Development and Regulatory 

Improvement Act of 1994, the appropriate Federal banking 

agency, in the agency’s discretion, may increase the maximum 

amount limitation contained in paragraph (4)(C)(ii), by regulation, from $200,000,000 to an amount not to exceed 

ø$1,000,000,000¿ $3,000,000,000 for purposes of such paragraph, if the agency determines that the greater amount would 

be consistent with the principles of safety and soundness for 

insured depository institutions. 

(e) EXAMINATION FEES.— 

(1) REGULAR AND SPECIAL EXAMINATIONS OF DEPOSITORY INSTITUTIONS.—The cost of conducting any regular examination 

or special examination of any depository institution under subsection (b)(2), (b)(3), or (d) or of any entity described in section 

3(q)(2) may be assessed by the Corporation against the instituVerDate Sep 11 2014 22:09 Apr 27, 2018 Jkt 079006 PO 00000 Frm 00012 Fmt 6659 Sfmt 6602 E:\HR\OC\HR657.XXX HR657
13 

tion or entity to meet the expenses of the Corporation in carrying out such examinations. 

(2) EXAMINATION OF AFFILIATES.—The cost of conducting any 

examination of any affiliate of any insured depository institution under subsection (b)(4) may be assessed by the Corporation against each affiliate which is examined to meet the Corporation’s expenses in carrying out such examination. 

(3) ASSESSMENT AGAINST DEPOSITORY INSTITUTION IN CASE OF

AFFILIATE’S REFUSAL TO PAY.— (A) IN GENERAL.—Subject to subparagraph (B), if any affiliate of any insured depository institution— 

(i) refuses to pay any assessment under paragraph 

(2); or 

(ii) fails to pay any such assessment before the end 

of the 60-day period beginning on the date the affiliate 

receives notice of the assessment, 

the Corporation may assess such cost against, and collect 

such cost from, the depository institution. 

(B) AFFILIATE OF MORE THAN 1 DEPOSITORY INSTITUTION.—If any affiliate referred to in subparagraph (A) is 

an affiliate of more than 1 insured depository institution, 

the assessment under subparagraph (A) may be assessed 

against the depository institutions in such proportions as 

the Corporation determines to be appropriate. 

(4) CIVIL MONEY PENALTY FOR AFFILIATE’S REFUSAL TO CO- OPERATE.— 

(A) PENALTY IMPOSED.—If any affiliate of any insured 

depository institution— 

(i) refuses to permit an examiner appointed by the 

Board of Directors under subsection (b)(1) to conduct 

an examination; or 

(ii) refuses to provide any information required to be 

disclosed in the course of any examination, 

the depository institution shall forfeit and pay a penalty of 

not more than $5,000 for each day that any such refusal 

continues. 

(B) ASSESSMENT AND COLLECTION.—Any penalty imposed 

under subparagraph (A) shall be assessed and collected by 

the Corporation in the manner provided in section 8(i)(2). 

(5) DEPOSITS OF EXAMINATION ASSESSMENT.—Amounts received by the Corporation under this subsection (other than 

paragraph (4)) may be deposited in the manner provided in 

section 13. 

(f) PRESERVATION OF AGENCY RECORDS.— 

(1) IN GENERAL.—A Federal banking agency may cause any 

and all records, papers, or documents kept by the agency or in 

the possession or custody of the agency to be— 

(A) photographed or microphotographed or otherwise reproduced upon film; or 

(B) preserved in any electronic medium or format which 

is capable of— 

(i) being read or scanned by computer; and 

(ii) being reproduced from such electronic medium or 

format by printing any other form of reproduction of 

electronically stored data. 

14 

(2) TREATMENT AS ORIGINAL RECORDS.—Any photographs, 

microphotographs, or photographic film or copies thereof described in paragraph (1)(A) or reproduction of electronically 

stored data described in paragraph (1)(B) shall be deemed to 

be an original record for all purposes, including introduction in 

evidence in all State and Federal courts or administrative 

agencies, and shall be admissible to prove any act, transaction, 

occurrence, or event therein recorded. 

(3) AUTHORITY OF THE FEDERAL BANKING AGENCIES.—Any 

photographs, microphotographs, or photographic film or copies 

thereof described in paragraph (1)(A) or reproduction of electronically stored data described in paragraph (1)(B) shall be 

preserved in such manner as the Federal banking agency shall 

prescribe, and the original records, papers, or documents may 

be destroyed or otherwise disposed of as the Federal banking 

agency may direct. 

(g) AUTHORITY TO PRESCRIBE REGULATIONS AND DEFINITIONS.— 

Except to the extent that authority under this Act is conferred on 

any of the Federal banking agencies other than the Corporation, 

the Corporation may— 

(1) prescribe regulations to carry out this Act; and 

(2) by regulation define terms as necessary to carry out this 

Act. 

(h) COORDINATION OF EXAMINATION AUTHORITY.— (1) STATE BANK SUPERVISORS OF HOME AND HOST STATES.— (A) HOME STATE OF BANK.—The appropriate State bank 

supervisor of the home State of an insured State bank has 

authority to examine and supervise the bank. 

(B) HOST STATE BRANCHES.—The State bank supervisor 

of the home State of an insured State bank and any State 

bank supervisor of an appropriate host State shall exercise 

its respective authority to supervise and examine the 

branches of the bank in a host State in accordance with 

the terms of any applicable cooperative agreement between 

the home State bank supervisor and the State bank supervisor of the relevant host State. 

(C) SUPERVISORY FEES.—Except as expressly provided in 

a cooperative agreement between the State bank supervisors of the home State and any host State of an insured 

State bank, only the State bank supervisor of the home 

State of an insured State bank may levy or charge State 

supervisory fees on the bank. 

(2) HOST STATE EXAMINATION.— 

(A) IN GENERAL.—With respect to a branch operated in 

a host State by an out-of-State insured State bank that resulted from an interstate merger transaction approved 

under section 44, or that was established in such State 

pursuant to section 5155(g) of the Revised Statutes of the 

United States, the third undesignated paragraph of section 

9 of the Federal Reserve Act or section 18(d)(4) of this Act, 

the appropriate State bank supervisor of such host State 

may— 

(i) with written notice to the State bank supervisor 

of the bank’s home State and subject to the terms of 

any applicable cooperative agreement with the State 

15 

bank supervisor of such home State, examine such 

branch for the purpose of determining compliance with 

host State laws that are applicable pursuant to section 

24(j), including those that govern community reinvestment, fair lending, and consumer protection; and 

(ii) if expressly permitted under and subject to the 

terms of a cooperative agreement with the State bank 

supervisor of the bank’s home State or if such out-ofState insured State bank has been determined to be in 

a troubled condition by either the State bank supervisor of the bank’s home State or the bank’s appropriate Federal banking agency, participate in the examination of the bank by the State bank supervisor of 

the bank’s home State to ascertain that the activities 

of the branch in such host State are not conducted in 

an unsafe or unsound manner. 

(B) NOTICE OF DETERMINATION.— 

(i) IN GENERAL.—The State bank supervisor of the 

home State of an insured State bank shall notify the 

State bank supervisor of each host State of the bank 

if there has been a final determination that the bank 

is in a troubled condition. 

(ii) TIMING OF NOTICE.—The State bank supervisor 

of the home State of an insured State bank shall provide notice under clause (i) as soon as is reasonably 

possible, but in all cases not later than 15 business 

days after the date on which the State bank supervisor has made such final determination or has received written notification of such final determination. 

(3) HOST STATE ENFORCEMENT.—If the State bank supervisor 

of a host State determines that a branch of an out-of-State insured State bank is violating any law of the host State that is 

applicable to such branch pursuant to section 24(j), including 

a law that governs community reinvestment, fair lending, or 

consumer protection, the State bank supervisor of the host 

State or, to the extent authorized by the law of the host State, 

a host State law enforcement officer may, with written notice 

to the State bank supervisor of the bank’s home State and subject to the terms of any applicable cooperative agreement with 

the State bank supervisor of the bank’s home State, undertake 

such enforcement actions and proceedings as would be permitted under the law of the host State as if the branch were 

a bank chartered by that host State. 

(4) COOPERATIVE AGREEMENT.— 

(A) IN GENERAL.—The State bank supervisors from 2 or 

more States may enter into cooperative agreements to facilitate State regulatory supervision of State banks, including cooperative agreements relating to the coordination of 

examinations and joint participation in examinations. 

(B) DEFINITION.—For purposes of this subsection, the 

term ‘‘cooperative agreement’’ means a written agreement 

that is signed by the home State bank supervisor and the 

host State bank supervisor to facilitate State regulatory 

supervision of State banks, and includes nationwide or 

16 

multi-State cooperative agreements and cooperative agreements solely between the home State and host State. 

(C) RULE OF CONSTRUCTION.—Except for State bank supervisors, no provision of this subsection relating to such 

cooperative agreements shall be construed as limiting in 

any way the authority of home State and host State law 

enforcement officers, regulatory supervisors, or other officials that have not signed such cooperative agreements to 

enforce host State laws that are applicable to a branch of 

an out-of-State insured State bank located in the host 

State pursuant to section 24(j). 

(5) FEDERAL REGULATORY AUTHORITY.—No provision of this 

subsection shall be construed as limiting in any way the authority of any Federal banking agency. 

(6) STATE TAXATION AUTHORITY NOT AFFECTED.—No provision 

of this subsection shall be construed as affecting the authority 

of any State or political subdivision of any State to adopt, 

apply, or administer any tax or method of taxation to any 

bank, bank holding company, or foreign bank, or any affiliate 

of any bank, bank holding company, or foreign bank, to the extent that such tax or tax method is otherwise permissible by 

or under the Constitution of the United States or other Federal 

law. 

(7) DEFINITIONS.—For purpose of this section, the following 

definitions shall apply: 

(A) HOST STATE, HOME STATE, OUT-OF-STATE BANK.—The 

terms ‘‘host State’’, ‘‘home State’’, and ‘‘out-of-State bank’’ 

have the same meanings as in section 44(g). 

(B) STATE SUPERVISORY FEES.—The term ‘‘State supervisory fees’’ means assessments, examination fees, branch 

fees, license fees, and all other fees that are levied or 

charged by a State bank supervisor directly upon an insured State bank or upon branches of an insured State 

bank. 

(C) TROUBLED CONDITION.—Solely for purposes of paragraph (2)(B), an insured State bank has been determined 

to be in ‘‘troubled condition’’ if the bank— 

(i) has a composite rating, as determined in its most 

recent report of examination, of 4 or 5 under the Uniform Financial Institutions Ratings System; 

(ii) is subject to a proceeding initiated by the Corporation for termination or suspension of deposit insurance; or 

(iii) is subject to a proceeding initiated by the State 

bank supervisor of the bank’s home State to vacate, 

revoke, or terminate the charter of the bank, or to liquidate the bank, or to appoint a receiver for the bank. 

(D) FINAL DETERMINATION.—For purposes of paragraph 

(2)(B), the term ‘‘final determination’’ means the transmittal of a report of examination to the bank or transmittal of official notice of proceedings to the bank. 

(i) FLOOD INSURANCE COMPLIANCE BY INSURED DEPOSITORY IN- STITUTIONS.— 

(1) EXAMINATIONS.—The appropriate Federal banking agency 

shall, during each scheduled on-site examination required by 

17 

this section, determine whether the insured depository institution is complying with the requirements of the national flood 

insurance program. 

(2) REPORT.— 

(A) REQUIREMENT.—Not later than 1 year after the date 

of enactment of the Riegle Community Development and 

Regulatory Improvement Act of 1994 and biennially thereafter for the next 4 years, each appropriate Federal banking agency shall submit a report to the Congress on compliance by insured depository institutions with the requirements of the national flood insurance program. 

(B) CONTENTS.—Each report submitted under this paragraph shall include a description of the methods used to 

determine compliance, the number of institutions examined during the reporting year, a listing and total number 

of institutions found not to be in compliance, actions taken 

to correct incidents of noncompliance, and an analysis of 

compliance, including a discussion of any trends, patterns, 

and problems, and recommendations regarding reasonable 

actions to improve the efficiency of the examinations processes. 

(j) CONSULTATION AMONG EXAMINERS.— 

(1) IN GENERAL.—Each appropriate Federal banking agency 

shall take such action as may be necessary to ensure that examiners employed by the agency— 

(A) consult on examination activities with respect to any 

depository institution; and 

(B) achieve an agreement and resolve any inconsistencies in the recommendations to be given to such institution as a consequence of any examinations. 

(2) EXAMINER-IN-CHARGE.—Each appropriate Federal banking agency shall consider appointing an examiner-in-charge 

with respect to a depository institution to ensure consultation 

on examination activities among all of the examiners of that 

agency involved in examinations of the institution. 

(k) ONE-YEAR RESTRICTIONS ON FEDERAL EXAMINERS OF FINANCIAL INSTITUTIONS.— 

(1) IN GENERAL.—In addition to other applicable restrictions 

set forth in title 18, United States Code, the penalties set forth 

in paragraph (6) of this subsection shall apply to any person 

who— 

(A) was an officer or employee (including any special 

Government employee) of a Federal banking agency or a 

Federal reserve bank; 

(B) served 2 or more months during the final 12 months 

of his or her employment with such agency or entity as the 

senior examiner (or a functionally equivalent position) of a 

depository institution or depository institution holding 

company with continuing, broad responsibility for the examination (or inspection) of that depository institution or 

depository institution holding company on behalf of the 

relevant agency or Federal reserve bank; and 

(C) within 1 year after the termination date of his or her 

service or employment with such agency or entity, knowVerDate Sep 11 2014 22:09 Apr 27, 2018 Jkt 079006 PO 00000 Frm 00017 Fmt 6659 Sfmt 6602 E:\HR\OC\HR657.XXX HR657
18 

ingly accepts compensation as an employee, officer, director, or consultant from— 

(i) such depository institution, any depository institution holding company that controls such depository 

institution, or any other company that controls such 

depository institution; or 

(ii) such depository institution holding company or 

any depository institution that is controlled by such 

depository institution holding company. 

(2) DEFINITIONS.—For purposes of this subsection— 

(A) the term ‘‘depository institution’’ includes an uninsured branch or agency of a foreign bank, if such branch 

or agency is located in any State; and 

(B) the term ‘‘depository institution holding company’’ includes any foreign bank or company described in section 

8(a) of the International Banking Act of 1978. 

(3) RULES OF CONSTRUCTION.—For purposes of this subsection, a foreign bank shall be deemed to control any branch 

or agency of the foreign bank, and a person shall be deemed 

to act as a consultant for a depository institution, depository 

institution holding company, or other company, only if such 

person directly works on matters for, or on behalf of, such depository institution, depository institution holding company, or 

other company. 

(4) REGULATIONS.— 

(A) IN GENERAL.—Each Federal banking agency shall 

prescribe rules or regulations to administer and carry out 

this subsection, including rules, regulations, or guidelines 

to define the scope of persons referred to in paragraph 

(1)(B). 

(B) CONSULTATION REQUIRED.—The Federal banking 

agencies shall consult with each other for the purpose of 

assuring that the rules and regulations issued by the agencies under subparagraph (A) are, to the extent possible, 

consistent, comparable, and practicable, taking into account any differences in the supervisory programs utilized 

by the agencies for the supervision of depository institutions and depository institution holding companies. 

(5) WAIVER.— 

(A) AGENCY AUTHORITY.—A Federal banking agency may 

grant a waiver, on a case by case basis, of the restriction 

imposed by this subsection to any officer or employee (including any special Government employee) of that agency, 

and the Board of Governors of the Federal Reserve System 

may grant a waiver of the restriction imposed by this subsection to any officer or employee of a Federal reserve 

bank, if the head of such agency certifies in writing that 

granting the waiver would not affect the integrity of the 

supervisory program of the relevant Federal banking agency. 

(B) DEFINITION.—For purposes of this paragraph, the 

head of an agency is— 

(i) the Comptroller of the Currency, in the case of 

the Office of the Comptroller of the Currency; 

19 

(ii) the Chairman of the Board of Governors of the 

Federal Reserve System, in the case of the Board of 

Governors of the Federal Reserve System; and 

(iii) the Chairperson of the Board of Directors, in the 

case of the Corporation. 

(6) PENALTIES.— 

(A) IN GENERAL.—In addition to any other administrative, civil, or criminal remedy or penalty that may otherwise apply, whenever a Federal banking agency determines that a person subject to paragraph (1) has become 

associated, in the manner described in paragraph (1)(C), 

with a depository institution, depository institution holding 

company, or other company for which such agency serves 

as the appropriate Federal banking agency, the agency 

shall impose upon such person one or more of the following 

penalties: 

(i) INDUSTRY-WIDE PROHIBITION ORDER.—The Federal banking agency shall serve a written notice or 

order in accordance with and subject to the provisions 

of section 8(e)(4) for written notices or orders under 

paragraph (1) or (2) of section 8(e), upon such person 

of the intention of the agency— 

(I) to remove such person from office or to prohibit such person from further participation in the 

conduct of the affairs of the depository institution, 

depository institution holding company, or other 

company for a period of up to 5 years; and 

(II) to prohibit any further participation by such 

person, in any manner, in the conduct of the affairs of any insured depository institution for a period of up to 5 years. 

(ii) CIVIL MONETARY PENALTY.—The Federal banking 

agency may, in an administrative proceeding or civil 

action in an appropriate United States district court, 

impose on such person a civil monetary penalty of not 

more than $250,000. Any administrative proceeding 

under this clause shall be conducted in accordance 

with section 8(i). In lieu of an action by the Federal 

banking agency under this clause, the Attorney General of the United States may bring a civil action 

under this clause in the appropriate United States district court. 

(B) SCOPE OF PROHIBITION ORDER.—Any person subject 

to an order issued under subparagraph (A)(i) shall be subject to paragraphs (6) and (7) of section 8(e) in the same 

manner and to the same extent as a person subject to an 

order issued under such section. 

(C) DEFINITIONS.—Solely for purposes of this paragraph, 

the ‘‘appropriate Federal banking agency’’ for a company 

that is not a depository institution or depository institution 

holding company shall be the Federal banking agency on 

20 

whose behalf the person described in paragraph (1) performed the functions described in paragraph (1)(B). 

* * * * * * * 

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