29–006 

113TH CONGRESS REPT. 113–134 " ! HOUSE OF REPRESENTATIVES 1st Session Part 1 

FINANCIAL COMPETITIVE ACT OF 2013 

JUNE 28, 2013.—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. 1341] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Financial Services, to whom was referred the 

bill (H.R. 1341) to require the Financial Stability Oversight Council 

to conduct a study of the likely effects of the differences between 

the United States and other jurisdictions in implementing the derivatives credit valuation adjustment capital requirement, having 

considered the same, report favorably thereon with amendments 

and recommend that the bill as amended do pass. 

The amendments (stated in terms of the page and line numbers 

of the introduced bill) are as follows: 

Page 3, line 22, strike ‘‘; and’’ and insert a semicolon. 

Page 4, line 2, strike the period at the end and insert ‘‘; and’’ and 

after such line insert the following: 

(C) ensure that the Financial Stability Oversight Council fulfills its statutory mandate to 

identify risks and respond to emerging threats to 

financial stability. 

PURPOSE AND SUMMARY

H.R. 1341, the Financial Competitive Act of 2013, requires the 

Financial Stability Oversight Council (FSOC) to study the likely effects of the differences between the U.S. and other jurisdictions in 

implementing the derivatives credit valuation adjustment (CVA) 

capital requirement. The bill also requires the study to examine the 

impact on derivatives end users and on the international derivatives market. 


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1The official transcript of this hearing was not available as of the time of the filing of this 

report. Mr. Bentsen’s testimony is available via hyperlink on the Financial Services Committee’s 

website at <http://financialservices.house.gov/calendar/eventsingle.aspx?EventID=326536>. 

BACKGROUND AND NEED FOR LEGISLATION

The Capital Requirements Directive IV package (‘‘CRD IV’’), announced by the European Union (EU) on February 28, 2013, includes the CVA requirement and Basel III, which will implement 

internationally agreed-upon standards on capital and liquidity 

across the European Union. Derivatives transactions with sovereign, pension fund and corporate counterparties (which are exempt from clearing obligations) will be exempt from the CVA. 

The EU CVA exemption has raised concerns that there will not 

be global derivatives regulatory alignment and that the CVA exemption could impact the pricing of trades and the amount of liquidity available for non-financial U.S. derivative end-users, as 

their transactions would not receive the CVA exemption. The 

FSOC study mandated by the bill is due within 90 days of enactment to the Chairman and Ranking Members of the Committees on 

Agriculture and Financial Services of the House of Representatives, 

as well as the Chairman and Ranking Members of the Committees 

on Agriculture, Nutrition and Forestry and Banking, Housing and 

Urban Affairs of the Senate. 

On April 11, 2013, Ken Bentsen, Acting CEO and President of 

the Securities Industry and Financial Markets Association, testified before the Subcommittee on Capital Markets and Government 

Sponsored Enterprises of the House Committee on Financial Services that 

This common sense bill would require [FSOC] to examine how variations in the implementation of Basel III capital rules related to derivatives will affect the health of the 

U.S. financial system. Furthermore, the legislation would 

require U.S. regulators to report to Congress with recommendations on how to develop greater uniformity in the 

standards and on how to minimize any adverse impact on 

both U.S. financial institutions and end-users of derivatives.1

As noted above, the CRD IV proposal would provide European 

banks with an exemption from CVA capital requirements for derivatives transactions with certain entities, including pension 

funds, sovereigns and all corporate counterparties. Consequently, 

the U.S. financial system (as well as all non-European jurisdictions) will be left with a misalignment of standards that, if 

unaddressed, could have a significant impact on the real economy. 

More specifically, a potential division between the U.S. and other 

jurisdictions with regard to CVA implementation could lead to 

price imbalances that will put U.S.-based institutions at a significant competitive disadvantage. Impacted entities include not only 

U.S. banks that could lose business to institutions based overseas, 

but also mainline commercial businesses that will be forced to pay 

higher prices for hedging their risk than their international competitors. In this context, it is worth noting a recent decision by Canadian officials to delay that country’s CVA capital requirement, 

despite moving forward with the rest of Basel III, until there is 


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more clarity around implementation in other jurisdictions and the 

impact on Canada’s financial services and business communities. 

HEARINGS

The Subcommittee on Capital Markets and Government Sponsored Enterprises of the Financial Services Committee held a hearing on H.R. 1341 on April 11, 2013. 

COMMITTEE CONSIDERATION

The Committee on Financial Services met in open session on 

May 7, 2013, and ordered H.R. 1341, as amended, to be reported 

favorably to the House by a recorded vote of 59 yeas to 0 nays (recorded vote no. FC–10), a quorum present. 

COMMITTEE VOTES

Clause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee to list the recorded votes on the motion to report legislation and amendments thereto. The only recorded vote occurred on the motion to report the bill, as amended, 

favorably to the House. The motion was adopted by a recorded vote 

of 59 yeas to 0 nays (recorded vote no. FC–10). 

RECORD VOTE NO. FC–10 

Representative Yea Nay Present Representative Yea Nay Present 

Mr. Hensarling ...................... X ........... ............. Ms. Waters ........................... X ........... .............

Mr. Gary G. Miller (CA) ......... X ........... ............. Mrs. Maloney (NY) ................ X ........... .............

Mr. Bachus ........................... X ........... ............. Ms. Vela ́zquez ...................... X ........... .............

Mr. King (NY) ........................ X ........... ............. Mr. Watt ............................... X ........... .............

Mr. Royce .............................. X ........... ............. Mr. Sherman ........................ X ........... .............

Mr. Lucas .............................. X ........... ............. Mr. Meeks ............................. X ........... .............

Mrs. Capito ........................... X ........... ............. Mr. Capuano ........................ X ........... .............

Mr. Garrett ............................ X ........... ............. Mr. Hinojosa ......................... X ........... .............

Mr. Neugebauer .................... X ........... ............. Mr. Clay ................................ X ........... .............

Mr. McHenry .......................... X ........... ............. Mrs. McCarthy (NY) .............. X ........... .............

Mr. Campbell ........................ X ........... ............. Mr. Lynch ............................. X ........... .............

Mrs. Bachmann .................... X ........... ............. Mr. David Scott (GA) ............ X ........... .............

Mr. McCarthy (CA) ................ X ........... ............. Mr. Al Green (TX) ................. X ........... .............

Mr. Pearce ............................. ........... ........... ............. Mr. Cleaver ........................... X ........... .............

Mr. Posey .............................. X ........... ............. Ms. Moore ............................. X ........... .............

Mr. Fitzpatrick ....................... X ........... ............. Mr. Ellison ............................ X ........... .............

Mr. Westmoreland ................. ........... ........... ............. Mr. Perlmutter ...................... X ........... .............

Mr. Luetkemeyer .................... X ........... ............. Mr. Himes ............................. X ........... .............

Mr. Huizenga (MI) ................. X ........... ............. Mr. Peters (MI) ..................... X ........... .............

Mr. Duffy ............................... X ........... ............. Mr. Carney ............................ X ........... .............

Mr. Hurt ................................ X ........... ............. Ms. Sewell (AL) .................... X ........... .............

Mr. Grimm ............................. X ........... ............. Mr. Foster ............................. X ........... .............

Mr. Stivers ............................ X ........... ............. Mr. Kildee ............................. X ........... .............

Mr. Fincher ............................ X ........... ............. Mr. Murphy (FL) ................... X ........... .............

Mr. Stutzman ........................ X ........... ............. Mr. Delaney .......................... X ........... .............

Mr. Mulvaney ........................ X ........... ............. Ms. Sinema .......................... X ........... .............

Mr. Hultgren .......................... X ........... ............. Mrs. Beatty ........................... X ........... .............

Mr. Ross ................................ X ........... ............. Mr. Heck (WA) ...................... X ........... .............

Mr. Pittenger ......................... X ........... .............

Mrs. Wagner .......................... X ........... .............

Mr. Barr ................................ X ........... .............

Mr. Cotton ............................. X ........... .............

Mr. Rothfus ........................... X ........... .............


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COMMITTEE OVERSIGHT FINDINGS

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

of Representatives, the Committee has held hearings and made 

findings that are reflected in 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. 1341 will require the Financial Stability Oversight Council (FSOC) to study, 

among other things, the likely effects of the differences between the 

U.S. and other jurisdictions in implementing the derivatives credit 

valuation adjustment (CVA) capital requirement. 

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, June 7, 2013. 

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. 1341, the Financial Competitive Act of 2013. 

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

to provide them. The CBO staff contact is Susan Willie. 

Sincerely, 

ROBERT A. SUNSHINE

(For Douglas W. Elmendorf, Director). 

Enclosure. 

H.R. 1341—Financial Competitive Act of 2013 

The Third Basel Accord, the latest in a series of international 

agreements among central banks and financial regulators to standardize capital requirements for banks, directs financial institutions 


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to, among other things, set aside additional capital reserves to account for the risk that counterparties participating in certain derivative agreements could default on the transaction. This additional 

capital requirement is known as the credit-value adjustment 

(CVA). H.R. 1341 would direct the Financial Stability Oversight 

Council (FSOC) to complete a study of the likely effects that differences between the way the United States and foreign regulators 

implement the CVA would have on financial institutions, users of 

derivatives, and derivatives markets. The study would include, 

among other things, an examination of the effect those differences 

would have on the pricing and cost of derivatives as well as the 

competitiveness of United States derivatives markets. H.R. 1341 

would direct the FSOC to prepare a report of its findings for the 

Congress within 90 days of the date of enactment of the bill. 

Based on information from the FSOC, CBO estimates that the 

bill would increase direct spending by about $1 million over the 

2014–2023 period for additional staff to conduct the study and prepare the report. Under current law, the FSOC is authorized to levy 

an assessment on certain financial institutions to offset its operating costs. Those assessments are recorded in the budget as revenues; CBO expects that the FSOC would exercise that authority, 

and therefore, we estimate that enacting the bill would increase 

revenues by about $1 million as well. 

In addition, CBO expects that the FSOC could use the expertise 

of staff from the regulatory agencies that make up the Council (the 

Federal Reserve System or the Securities and Exchange Commission, for example) to complete the study. CBO estimates that any 

additional costs incurred by those agencies would not be significant. On net, CBO estimates that enacting the bill would not have 

a significant effect on the deficit over the 10-year period. Because 

enacting H.R. 1341 would increase both direct spending and revenues, pay-as-you-go procedures apply. 

H.R. 1341 contains no intergovernmental mandates as defined in 

the Unfunded Mandates Reform Act (UMRA) and would not affect 

the budgets of state, local, or tribal governments. 

Assuming that the Financial Stability Oversight Council increases fees to offset the costs of conducting the study required by 

the bill, H.R. 1341 would impose a private-sector mandate by increasing the cost of an existing mandate on financial institutions 

required to pay those fees. Based on information from the FSOC, 

CBO estimates that the cost of the mandate would total about $1 

million over the next 10 years, and thus fall well below the annual 

threshold for private-sector mandates established in UMRA ($150 

million in 2013, adjusted annually for inflation). 

The CBO staff contact for this estimate is Susan Willie. The estimate was approved by Theresa Gullo, Deputy 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. 


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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 section 102(b)(3) of the Congressional Accountability Act. 

EARMARK IDENTIFICATION

H.R. 1341 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(j) of H. Res. 5, 113th Cong. (2013), the 

Committee states that no provision of H.R. 1341 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(k) of H. Res. 5, 113th Cong. (2013), the 

Committee states that H.R. 1341 does not contain any directed 

rulemakings. 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION (AS AMENDED)

Section 1. Short Title. This section states that the Act may be 

cited as the Financial Competitive Act of 2013. 

Section 2. Study of Implementation of Basel III Capital Requirements Related to Derivatives Exposures. This section requires the 

FSOC to conduct a study of the likely effects that differences between the U.S. and other jurisdictions in implementing the derivatives CVA capital requirements would have on: (i) U.S. financial institutions that conduct derivatives transactions and participate in 

derivatives markets; (ii) end users of derivatives; and (iii) international derivatives markets. The section requires certain content 

to be included in the study and requires the study to offer recommendations that Congress and the Federal financial regulatory 

agencies that comprise the FSOC should take in response to the 

study’s findings. 

Æ 


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