I 

113TH CONGRESS 

1ST SESSION H. R. 613 

To establish a market-based trigger to determine the capital adequacy of 

bank holding companies and decrease systemic risk, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 12, 2013 

Mr. CAMPBELL introduced the following bill; which was referred to the 

Committee on Financial Services 

A BILL 

To establish a market-based trigger to determine the capital 

adequacy of bank holding companies and decrease systemic risk, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Systemic Risk Mitiga5 tion Act’’. 

6 SEC. 2. DEFINITIONS. 

7 In this Act: 

8 (1) AVERAGE DAILY CLOSING PRICE.— 

9 (A) IN GENERAL.—The term ‘‘average 

10 daily closing price’’ means the average daily 


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1 closing price of a credit default swap on long2 term subordinated debt of a bank holding com3 pany during a 30-day period. 

4 (B) REGULATIONS.—The Board, through 

5 regulations, shall develop a method to deter6 mine the daily closing price of a credit default 

7 swap on long-term subordinated debt of a bank 

8 holding company and shall calculate the average 

9 daily closing price accordingly. 

10 (2) BANK HOLDING COMPANY.—The term 

11 ‘‘bank holding company’’ has the same meaning 

12 given such term in section 2 of the Bank Holding 

13 Company Act of 1956 (12 U.S.C. 1841), but shall 

14 only include such companies with total consolidated 

15 assets greater than or equal to $50,000,000,000. 

16 (3) BOARD.—The term ‘‘Board’’ means the 

17 Board of Governors of the Federal Reserve System. 

18 (4) CREDIT DEFAULT SWAP.—The term ‘‘credit 

19 default swap’’ has the same meaning given the term 

20 ‘‘swap agreement’’ in section 206A of the Gramm21 Leach-Bliley Act (15 U.S.C. 78c nt). 

22 (5) LONG-TERM SUBORDINATED DEBT.—The 

23 term ‘‘long-term subordinated debt’’ means unse24 cured bonds or other debt instruments issued by a 

25 bank holding company that— 


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1 (A) is subordinated to the claims of deposi2 tors or general creditors; and 

3 (B) has a maturity date not less than 5 

4 years. 

5 (6) STRESS TEST.— 

6 (A) IN GENERAL.—The term ‘‘stress test’’ 

7 means an evaluation designed by the Board to 

8 determine whether a bank holding company— 

9 (i) has the capital, on a total consoli10 dated basis, necessary to absorb losses as 

11 a result of adverse economic conditions; 

12 and 

13 (ii) is sufficiently capitalized to meet 

14 systemically important obligations. 

15 (B) REGULATIONS.—The term ‘‘system16 ically important obligation’’ shall be defined in 

17 regulations prescribed by the Board. 

18 (7) TIER 1 CAPITAL.—The term ‘‘tier 1 capital’’ 

19 has the same meaning given in part 225 of title 12, 

20 Code of Federal Regulations, as in effect on the date 

21 of enactment of this Act, or any successor thereto. 

22 SEC. 3. MARKET-BASED TRIGGER TO DETERMINE ADE23 QUACY OF CAPITAL. 

24 (a) MARKET-BASED TRIGGER.— 

25 (1) GREATER THAN 50 BASIS POINTS.— 


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1 (A) IN GENERAL.—In the case that the av2 erage daily closing price exceeds 50 basis 

3 points— 

4 (i) the Board shall notify the bank 

5 holding company that it needs to raise ad6 ditional tier 1 capital in order to reduce 

7 such closing price below 50 basis points; 

8 (ii) not later than 14 days (or less if 

9 the Board makes a determination that con10 ditions warrant a shorter period of time) 

11 after such notification under clause (i), 

12 such company shall submit to the Board 

13 an action plan detailing how the company 

14 intends on remediating its capital defi15 ciency; 

16 (iii) such company has 30 days to im17 plement the plan submitted under clause 

18 (ii) after such plan is approved by the 

19 Board; and 

20 (iv) if after the end of the 30-day pe21 riod described in clause (iii) the average 

22 daily closing price exceeds 50 basis points, 

23 the Board and such company shall repeat 

24 clause (i) through (iii) until such closing 


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1 price is less than or equal to 50 basis 

2 points. 

3 (B) APPEAL.— 

4 (i) IN GENERAL.—A bank holding 

5 company may appeal the findings of the 

6 Board under subparagraph (A) and re7 quest that the Board conduct a stress test. 

8 (ii) TOLLING.—An appeal made pur9 suant to clause (i) shall toll any deadline 

10 specified under subparagraph (A) until the 

11 conclusion of the appeals process. 

12 (iii) CAPITAL DEFICIENCY.—If the 

13 Board determines, after conducting a 

14 stress test pursuant to clause (i), that the 

15 bank holding company has a capital defi16 ciency, the Board and the bank holding 

17 company shall repeat clause (i) through 

18 (iii) of subparagraph (A) in accordance 

19 with clause (iv) of such subparagraph. 

20 (2) GREATER THAN 75 BASIS POINTS.—In the 

21 case that the average daily closing price exceeds 75 

22 basis points— 

23 (A) the Board shall notify the bank hold24 ing company in accordance with clause (i) of 

25 paragraph (1)(A); 


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1 (B) such company shall submit and imple2 ment an action plan in accordance with clause 

3 (ii) and (iii) of paragraph (1)(A); 

4 (C) the Board may suspend or limit divi5 dends paid by the bank holding company until 

6 such company’s average daily closing price is 

7 less than or equal to 50 basis points; 

8 (D) the Board shall notify the company 

9 that it will be placed into receivership in accord10 ance with paragraph (3) if the average daily 

11 closing price exceeds 100 basis points; 

12 (E) the Board shall conduct a stress test; 

13 and 

14 (F) if the Board determines, after con15 ducting a stress test pursuant to subparagraph 

16 (E), that such company has a capital deficiency, 

17 not later than 14 days (or less if the Board 

18 makes a determination that conditions warrant 

19 a shorter period of time) after such stress test 

20 is completed, such company shall submit and 

21 implement an action plan in accordance with 

22 clause (ii) and (iii) of paragraph (1)(A). 

23 (3) GREATER THAN 100 BASIS POINTS.—In the 

24 case that the average daily closing price exceeds 100 

25 basis points, the Board shall place the company into 


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1 receivership in accordance with the orderly liquida2 tion authority provided under title II of the Dodd3 Frank Wall Street Reform and Consumer Protection 

4 Act (12 U.S.C. 5381 et seq.). 

5 (b) FAILURE TO SUBMIT ACTION PLAN.—A failure 

6 by a bank holding company to submit an action plan pur7 suant to subsection (a) within the time period required 

8 under such subsection shall result in the Board placing 

9 such company into receivership as described in subsection 

10 (a)(3). 

11 (c) LIMITATION ON CLAIMS FOR HOLDERS OF LONG12 TERM SUBORDINATED DEBT.—Any entity that is a holder 

13 of long-term subordinated debt of a bank holding company 

14 that has been placed into receivership pursuant to this sec15 tion shall receive the lesser of— 

16 (1) 80 percent of the face value of such debt; 

17 or 

18 (2) the residual value of such company after all 

19 other claims of other creditors have been satisfied. 

20 (d) SUBORDINATED DEBT REQUIREMENT.— 

21 (1) IN GENERAL.—The Board shall require 

22 each bank holding company to issue and maintain 

23 long-term subordinated debt in an amount greater 

24 than or equal to 15 percent of the total consolidated 

25 assets of such company. 


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1 (2) DEADLINE.—A bank holding company shall 

2 meet the requirement set forth in paragraph (1) no 

3 later than the effective date of this section. 

4 (3) FAILURE TO MEET REQUIREMENT.—If a 

5 bank holding company fails to meet the requirement 

6 set forth in paragraph (1), such company shall sub7 mit a plan to the Board describing the steps the 

8 company will take to meet such requirement. 

9 (e) EFFECTIVE DATE.—This section shall take effect 

10 2 years after the date of the enactment of this Act. 

11 SEC. 4. REPEAL. 

12 (a) PROHIBITIONS ON PROPRIETARY TRADING.— 

13 Section 13 of the Bank Holding Company Act of 1956 

14 (12 U.S.C. 1851) is repealed. 

15 (b) ENHANCED PRUDENTIAL STANDARDS.—Section 

16 165 of the Dodd-Frank Wall Street Reform and Consumer 

17 Protection Act (12 U.S.C. 5365) is repealed. 

Æ 


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