II 

111TH CONGRESS 

2D SESSION S. 3005 

To create an independent research institute, to be known as the ‘‘National 

Institute of Finance’’, that will oversee the collection and standardization 

of data on financial entities and activities, and conduct monitoring and 

other research and analytical activities to support the work of the Federal 

financial regulatory agencies and the Congress. 

IN THE SENATE OF THE UNITED STATES 

FEBRUARY 4, 2010 

Mr. REED introduced the following bill; which was read twice and referred to 

the Committee on Banking, Housing, and Urban Affairs 

A BILL 

To create an independent research institute, to be known 

as the ‘‘National Institute of Finance’’, that will oversee 

the collection and standardization of data on financial 

entities and activities, and conduct monitoring and other 

research and analytical activities to support the work 

of the Federal financial regulatory agencies and the Congress. 

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; TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘National Institute of Finance Act of 2010’’. 

mstockstill on DSKH9S0YB1PROD with BILLS

2 

•S 3005 IS

1 (b) TABLE OF CONTENTS.—The table of contents for 

2 this Act is as follows: 

3 SEC. 2. FINDINGS AND PURPOSES. 

4 (a) FINDINGS.—Congress finds the following: 

5 (1) The United States is experiencing the worst 

6 economic and financial crisis since the Great Depres7 sion. The nature of the current crisis is systemic. It 

8 was set in motion not by the actions of any single 

9 entity, but by a loss of confidence throughout the fi10 nancial system as a whole. 

11 (2) Such catastrophic events revealed signifi12 cant shortcomings in the legal tools available to fi13 nancial policymakers. The scale and systemic nature 

14 of the crisis calls for a thorough review of the 

15 United States’ system of financial regulation, to as16 sess its capacity to understand, monitor, and re17 spond to systemic threats. It is critical that financial 

18 regulators have the legal tools they need to act 

19 quickly, decisively, effectively, and when appropriate, 

20 preemptively, to prevent systemic financial crises in 

21 the future and to mitigate their negative impact, 

22 should they recur. 

23 (3) The recent catastrophic events in financial 

24 markets also revealed significant gaps in the infor25 mation and analytic tools available to regulators and 

mstockstill on DSKH9S0YB1PROD with BILLS

3 

•S 3005 IS

1 policymakers charged with ensuring the health of the 

2 financial system. 

3 (4) Systemic risk involves interactions among 

4 financial entities in addition to features of individual 

5 firms. Therefore, to understand and monitor the 

6 buildup of systemic risk in the financial system re7 quires information about such interactions among 

8 institutions. 

9 (5) Operational methods do not exist by which 

10 to measure systemic risks in the United States fi11 nancial system. Nor do proven operational tech12 niques exist by which regulators can identify the 

13 buildup of systemic risks in the United States finan14 cial system. 

15 (6) Regulators do not have effective methodolo16 gies for assessing the effects of particular regulatory 

17 actions or approaches on the overall health of the fi18 nancial system. 

19 (7) Financial regulators do not have the data 

20 needed to map the networks of counterparty rela21 tionships through which systemic contagion could 

22 spread. Nor do they have the analytic tools required 

23 to translate such data into useful, actionable infor24 mation. 

mstockstill on DSKH9S0YB1PROD with BILLS

4 

•S 3005 IS

1 (8) Notwithstanding noteworthy efforts from 

2 the research community, sustained, large-scale pro3 grams of applied research and development nec4 essary to create operational systems for under5 standing, measuring, and monitoring systemic risk 

6 in financial systems have not emerged. 

7 (9) There is a substantial amount of high-qual8 ity research in academia in relevant disciplines, in9 cluding financial economics, statistics, and oper10 ations research, but such research tends to focus on 

11 theoretical or conceptual innovations that are not 

12 immediately reducible to operational practice. 

13 (10) The incentives confronting academic re14 searchers work against the production of research 

15 that does not yield novel theoretical insights or com16 putational techniques. 

17 (11) The challenges of gaining access to data 

18 and obtaining funding from government and indus19 try for academic research severely restrict the num20 ber of academics working on understanding and 

21 monitoring systemic risk in the financial markets. 

22 (12) Some of the largest commercial firms 

23 make substantial investments in research and devel24 opment in the area of quantitative finance, but such 

25 commercial research programs are targeted almost 

mstockstill on DSKH9S0YB1PROD with BILLS

5 

•S 3005 IS

1 exclusively at applications that create commercial 

2 value for the firms undertaking the substantial in3 vestments necessary to support the programs, and 

4 focus primarily on techniques for pricing particular 

5 financial instruments and managing firm-specific 

6 risks. 

7 (13) Financial institutions that sponsor re8 search programs usually protect the results of inves9 tigations as commercial trade secrets. Even those re10 sults that might be useful in application to the anal11 ysis of systemic risk are generally not available to 

12 the public. 

13 (14) No organization anywhere has access to 

14 the comprehensive transaction-level data that are 

15 necessary to map the network of counterparty rela16 tionships in the financial system. Absent such data, 

17 it is not possible to evaluate the primary 

18 counterparty risks, the extent to which any given 

19 firm is vulnerable to the failure of one of its counter20 parties, or broader counterparty network risks. 

21 (15) It is not possible to understand, assess, or 

22 predict how the collapse of one or more institutions 

23 might set off a cascade of failure that destabilizes 

24 the entire financial system. 

mstockstill on DSKH9S0YB1PROD with BILLS

6 

•S 3005 IS

1 (16) Without intelligence about the network of 

2 counterparty relationships and the liquidity provided 

3 by the members of the counterparty network, it is 

4 difficult even to identify reliably the set of institu5 tions that regulators should deem to be systemically 

6 important. 

7 (17) Notwithstanding statutory mandates that 

8 call for sharing of information among regulatory 

9 agencies, United States financial regulators do not 

10 require that firms report data in a uniform standard 

11 format. The lack of compatibility in the data for12 mats used by different agencies implies in practice 

13 that agencies find it difficult and expensive to inte14 grate data from multiple sources. 

15 (18) In periods of financial crisis such as that 

16 experienced in the 2 years preceding the date of en17 actment of this Act, absence of data comparability 

18 becomes a critical handicap, in that dispersed infor19 mation cannot quickly be integrated into a com20 prehensive framework that could help reveal the con21 dition of the financial system as a whole. Without a 

22 capacity quickly to compare and integrate financial 

23 data of diverse types from multiple sources, regu24 lators are unable to analyze the state of the financial 

25 system accurately and comprehensively. Nor are they 

mstockstill on DSKH9S0YB1PROD with BILLS

7 

•S 3005 IS

1 able to foresee, and potentially head off, the onset 

2 of a financial crisis. 

3 (19) The events of September 2008 offer a so4 bering example of the consequences that can flow 

5 from an inability quickly to integrate financial data 

6 from diverse sources. During several critical days in 

7 that month, senior Government officials con8 templated the possible consequences of allowing the 

9 failure of Lehman Brothers Holdings, Inc. Insofar 

10 as the content of their deliberations is accessible in 

11 the public record, there is little evidence that such 

12 officials had at their disposal an intelligence system 

13 that could illuminate the potential consequences of 

14 alternative choices. Notwithstanding that the United 

15 States Government, through its several agencies, col16 lects a broad range of information from financial 

17 firms, the events of September 2008 revealed that, 

18 at this most critical juncture, these data and accom19 panying analytics could not provide financial officials 

20 with the information they needed. 

21 (20) The creation of a system for collecting and 

22 organizing a comprehensive financial transaction 

23 database that employs standardized formats is fea24 sible. 

mstockstill on DSKH9S0YB1PROD with BILLS

8 

•S 3005 IS

1 (21) The Enterprise Data Management Coun2 cil, an industry consortium, is on record as advo3 cating both the feasibility and desirability of bring4 ing uniform standards to the collection, reporting, 

5 and management of financial transaction data. 

6 (22) A leading financial firm has developed for 

7 its internal use a system that incorporates com8 prehensive reference databases of all legal entities in 

9 its counterparty network and of all of the many 

10 types of financial instruments in which it transacts. 

11 Using the system, the firm can compute its exposure 

12 to many of their counterparties within an hour. 

13 (23) A leading information technology firm has 

14 developed a prototype of an operational system that 

15 would support a comprehensive database of financial 

16 instruments and transactions across the entire econ17 omy, and in collaboration with other private sector 

18 firms and public sector entities, is in the process of 

19 developing a prototype system for maintaining the 

20 needed system-wide reference databases. 

21 (24) The community of financial regulators can 

22 realize substantial benefits by consolidating into one 

23 entity the highly technical tasks of establishing and 

24 maintaining uniform standards for reporting finan25 cial data, organizing and managing high-volume 

mstockstill on DSKH9S0YB1PROD with BILLS

9 

•S 3005 IS

1 flows of financial data, providing analytic and high 

2 performance computational services, performing ap3 plied research and development activities, and con4 ducting, coordinating, and sponsoring essential long 

5 term, fundamental research in the field of financial 

6 analysis and regulatory intelligence. 

7 (25) Such technical tasks benefit from increas8 ing economies of scale, the total cost of providing 

9 such services to the regulatory community promises 

10 to be lower if one agency is tasked to provide all of 

11 such data, instead of creating redundant and less ef12 fective units in each of the several financial regu13 latory agencies. 

14 (26) An entity that provides access to data and 

15 analytic tools to all regulatory agencies on a common 

16 basis would help to ensure that all agencies are re17 ceiving accurate, consistent, comparable data and 

18 analytic tools that can be modified for agency-spe19 cific needs. 

20 (27) The creation of an entity that creates 

21 shared data and analytic services will provide a nat22 ural and regular vehicle for the exchange of research 

23 and collaboration between regulatory agencies. 

24 (28) The emergence of uniform standards for 

25 referencing and reporting financial transactions 

mstockstill on DSKH9S0YB1PROD with BILLS

10 

•S 3005 IS

1 would generate substantial benefits for the financial 

2 services industry. There is, at present, no consistent, 

3 comprehensive, and universal system for coding, 

4 transmitting, and storing financial transaction data. 

5 Data reside typically in unconnected databases and 

6 spreadsheets, using multiple formats and incon7 sistent definitions. The routine conduct of business 

8 obliges firms to incur substantial costs to translate 

9 and transfer data among otherwise incompatible sys10 tems. In addition, this data incomparability impedes 

11 the ability of companies to assess their risks accu12 rately. The adoption of a common language for data 

13 coding and handling would dramatically reduce costs 

14 for processing transactions and carrying out other 

15 administrative tasks. Standardized reporting would 

16 also enable firms to map their counterparty relation17 ships more clearly and more easily understand their 

18 credit exposures to other firms, a development that 

19 promises improvements in risk management prac20 tices across the industry. 

21 (29) In August 2008, the Counterparty Risk 

22 Management Policy Group called for the financial 

23 industry to move rapidly toward real-time reconcili24 ation and confirmation of financial transactions. In25 dustry experts believe that this change would yield 

mstockstill on DSKH9S0YB1PROD with BILLS

11 

•S 3005 IS

1 substantial benefits to firms individually, to the fi2 nancial services industry, and to the economy as a 

3 whole. Achieving this goal would not be possible, 

4 however, without industry-wide adoption of common 

5 standards for coding and handling financial trans6 action data. Despite the clear benefits of data stand7 ardization and despite years of effort by the indus8 try, through consortia such as the Enterprise Data 

9 Management Council, the financial services industry 

10 has not been able to make meaningful progress to11 wards the goal of universal adoption of uniform, 

12 consistent standards for data handling. 

13 (30) Efforts to see a common set of standards 

14 for financial data adopted universally are impeded 

15 by so-called ‘‘network effects’’. The benefits of adop16 tion for any one firm depend on the extent to which 

17 other firms adopt the same common language. For 

18 any one institution, the full benefits are distinctly 

19 limited until a critical number of participants in the 

20 industry adopt the same standards. In light of these 

21 network effects, the adoption of a single data han22 dling standard by all industry participants presents 

23 a daunting coordination challenge. Each individual 

24 firm is discouraged from making the substantial in25 vestments required to upgrade its own systems, unmstockstill on DSKH9S0YB1PROD with BILLS

12 

•S 3005 IS

1 less and until they receive assurance that others in 

2 the industry will follow suit. Many firms are defer3 ring significant upgrades to their systems until well4 defined industry-wide standards are accepted. 

5 (31) The financial services industry’s historical 

6 experience strongly suggests that the industry is un7 likely to achieve universal adoption of a single data8 handling standard on its own initiative, through ei9 ther the decentralized actions of industry partici10 pants or through voluntary coordination at the urg11 ing of industry consortia or trade associations. 

12 Standardization of financial data will require an ex13 ternal mandate. 

14 (32) The new data standards promulgated for 

15 reporting by firms will emerge as the de facto stand16 ard for data management in the finance industry, a 

17 standard on which firms could converge. Firms 

18 could then be confident of realizing a significant re19 turn on the investment needed to update their inter20 nal systems, knowing that other industry partici21 pants were doing likewise. 

22 (33) The establishment of Federal requirements 

23 for the maintenance and provision of reference data24 bases and reporting of transactions and position 

25 data to a central repository would assure individual 

mstockstill on DSKH9S0YB1PROD with BILLS

13 

•S 3005 IS

1 institutions of a significant return on the investment 

2 needed to update their internal systems. Firms 

3 would benefit from not having to maintain their own 

4 unique reference databases, standardized reporting 

5 would greatly reduce the cost of reconciling trades 

6 and other back office activities, and it would give 

7 firms a clear map of their counterparty relation8 ships, which would facilitate better risk management 

9 across the industry. 

10 (34) Once achieved, the universal adoption of 

11 standard protocols for handling financial transaction 

12 data promises to generate significant and sustained 

13 improvements in the efficiency and productivity of 

14 the financial services industry in the United States. 

15 Such improvements will help to secure and maintain 

16 the international leadership position of United 

17 States capital markets. 

18 (35) United States regulators must never again 

19 find themselves confronting a financial crisis without 

20 the full set of legal, data, and analytic tools they 

21 need to understand, measure, monitor, and respond 

22 intelligently to systemic risks that threaten the sta23 bility of the United States financial system. 

24 (b) PURPOSES.—The purposes of this Act are— 

mstockstill on DSKH9S0YB1PROD with BILLS

14 

•S 3005 IS

1 (1) to ensure that the financial regulatory com2 munity is equipped fully with the data and analytic 

3 tools it needs to fulfill its responsibility to safeguard 

4 the United States financial system; 

5 (2) to reduce the likelihood of another systemic 

6 financial crisis occurring; 

7 (3) to restore integrity and confidence to the fi8 nancial markets of the United States; 

9 (4) to provide for the security of the United 

10 States economy from potential external threats to 

11 the United States financial system; 

12 (5) to improve the efficiency of the financial 

13 markets in the United States; 

14 (6) to reduce the cost and increase the effec15 tiveness of coordinated financial regulation in the 

16 United States; 

17 (7) to help maintain the leadership position of 

18 the United States as home to the most efficient, 

19 competitive, and productive capital markets in the 

20 world; and 

21 (8) to help restore and maintain conditions in 

22 the United States financial system that will support 

23 the creation of wealth and prosperity in the United 

24 States. 

mstockstill on DSKH9S0YB1PROD with BILLS

15 

•S 3005 IS

1 SEC. 3. DEFINITIONS. 

2 In this Act, the following definitions shall apply: 

3 (1) FINANCIAL REGULATORY AGENCY.—The 

4 term ‘‘financial regulatory agency’’ means any Fed5 eral regulatory agency or body charged with regu6 lating, examining, or supervising a financial entity 

7 or activity, including any financial systemic risk 

8 council or agency established by Congress. 

9 (2) INSTITUTE; DIRECTOR; BOARD OF DIREC10 TORS.—The terms ‘‘Institute’’, ‘‘Director’’, and 

11 ‘‘Board of Directors’’ mean the National Institute of 

12 Finance, the Director thereof, and the Board of Di13 rectors thereof, respectively. 

14 (3) FINANCIAL ENTITY.— 

15 (A) IN GENERAL.—The term ‘‘financial en16 tity’’ means any corporation, partnership, indi17 vidual, or other organizational form, whether 

18 public or private, used to engage in any type of 

19 financial activity that may contribute to sys20 temic risk, including any bank, savings associa21 tion, credit union, industrial loan company, 

22 trust, pension fund, holding company, lender, 

23 finance company, mortgage broker, broker-deal24 er, mutual fund or other investment company, 

25 investment adviser, hedge fund, insurance com26 pany, clearinghouse or other central 

mstockstill on DSKH9S0YB1PROD with BILLS

16 

•S 3005 IS

1 counterparty, exchange, and any other entity or 

2 institution that the Director determines, at the 

3 formation of the Institute, are necessary for the 

4 Institute to complete its duties under this Act. 

5 (B) DIRECTOR AUTHORITY.—The Director 

6 may, by rule, add new types of entities or insti7 tutions to be treated as financial entities for 

8 purposes of this Act. 

9 (4) SYSTEMIC RISK.—The term ‘‘systemic risk’’ 

10 means the risk that a failure or default by a finan11 cial entity or entities, or exposures to a financial 

12 product or products or activity will produce— 

13 (A) significant disruptions to the oper14 ations of financial markets; 

15 (B) the spreading of financial losses and 

16 failures through the financial system; or 

17 (C) significant disruption to the broader 

18 economy. 

19 (5) FINANCIAL CONTRACT.—The term ‘‘finan20 cial contract’’ mean a legally binding agreement be21 tween 2 or more counterparties, describing rights, 

22 and obligations relating to the future delivery of 

23 items of intrinsic or extrinsic value among the 

24 counterparties. 

mstockstill on DSKH9S0YB1PROD with BILLS

17 

•S 3005 IS

1 (6) FINANCIAL INSTRUMENT.—The term ‘‘fi2 nancial instrument’’ means a financial contract in 

3 which the terms and conditions are publicly avail4 able, and the roles of 1 or more of the counterpar5 ties are assignable without the consent of any of the 

6 other counterparties, including common stock of a 

7 publicly traded company, government bonds, and ex8 change traded futures and options contracts. 

9 (7) FINANCIAL ENTITY REFERENCE DATA10 BASE.—The term ‘‘financial entity reference data11 base’’ means a comprehensive list of financial enti12 ties that may be counterparties to financial trans13 actions or referenced in the contractual structure of 

14 a financial instrument. For each financial entity, the 

15 database shall include, but not be limited to a 

16 unique identifier, and sufficient information to dif17 ferentiate the entity from every other entity, includ18 ing an exact legal name and an address for each 

19 company, and an exact legal name and a social secu20 rity number for each American citizen. For financial 

21 entities that are legally owned by or otherwise con22 tained within other financial entities, the database 

23 shall include such information. 

24 (8) FINANCIAL INSTRUMENT REFERENCE

25 DATABASE.—The term ‘‘financial instrument refmstockstill on DSKH9S0YB1PROD with BILLS

18 

•S 3005 IS

1 erence database’’ means a comprehensive list of 

2 unique financial instruments. For each financial in3 strument, the database shall include a unique identi4 fier and a comprehensive description of the contrac5 tual structure of the instrument as well as all ex6 press terms governing the interpretation and imple7 mentation of the contract, including jurisdiction, 

8 force majeure, and dispute resolution. The contrac9 tual structure shall include the financial and eco10 nomic obligations and rights, both express and im11 plied, and including through legal agreements such 

12 as netting agreements, established among all of the 

13 counterparties having identified roles in the contract, 

14 including advisors, principals, trustees, custodians, 

15 guarantors, prime brokers, executing brokers, clear16 ing brokers, and issuers of securities. An electronic 

17 copy of the prospectus for each financial instrument 

18 for which a prospectus was created or distributed 

19 shall also be contained in the database. 

20 (9) FINANCIAL TRANSACTION DATA.—The term 

21 ‘‘financial transaction’’ means the explicit or implicit 

22 creation of a financial contract where at least one of 

23 the counterparties is required to report to the Insti24 tute. The data describing the transaction shall in25 clude the structure of the contract created in the 

mstockstill on DSKH9S0YB1PROD with BILLS

19 

•S 3005 IS

1 transaction, as well as all express terms governing 

2 the interpretation and implementation of the con3 tract, including jurisdiction, force majeure, and dis4 pute resolution. The contractual structure shall in5 clude clearly identified counterparties, clearly identi6 fied financial instruments (when used as part of the 

7 structure of the contract), and the financial and eco8 nomic obligations and rights, both express and im9 plied, established among all of the counterparties 

10 with identified roles in the contract. 

11 (10) POSITION DATA.—The term ‘‘position’’ 

12 means a financial asset or liability held on the bal13 ance sheet of a financial entity. A new position is 

14 created, or the quantity of an existing position is 

15 changed, by the execution of a financial transaction 

16 involving the financial entity as a counterparty. Po17 sition data include— 

18 (A) the counterparty identifier; 

19 (B) a contract identifier; 

20 (C) the role of the counterparty on the 

21 transaction; 

22 (D) a quantity, if applicable; 

23 (E) a location, if applicable; and 

mstockstill on DSKH9S0YB1PROD with BILLS

20 

•S 3005 IS

1 (F) the valuation of the position for the 

2 purposes of the books and records of the finan3 cial entity. 

4 SEC. 4. ESTABLISHMENT OF NATIONAL INSTITUTE OF FI5 NANCE; ADMINISTRATIVE MATTERS. 

6 (a) IN GENERAL.— 

7 (1) ESTABLISHMENT.—There is established the 

8 National Institute of Finance, which shall be an 

9 independent establishment, as that term is defined 

10 in section 104 of title 5, United States Code. 

11 (2) MISSION.—The mission of the Institute is 

12 to support the Federal financial regulatory agencies, 

13 including any systemic risk council or agency estab14 lished by Congress, by— 

15 (A) collecting and providing data; 

16 (B) standardizing the types and formats of 

17 data reported and collected; 

18 (C) performing applied research and essen19 tial long-term research; 

20 (D) developing tools for risk measurement 

21 and monitoring; 

22 (E) performing other related services; and 

23 (F) making the results of its activities 

24 available to financial regulatory agencies. 

25 (b) DIRECTOR.— 

mstockstill on DSKH9S0YB1PROD with BILLS

21 

•S 3005 IS

1 (1) APPOINTMENT.—The Institute shall be 

2 headed by a Director, who shall be appointed by the 

3 President, by and with the advice and consent of the 

4 Senate. 

5 (2) TERM OF SERVICE.—The Director shall 

6 serve for a term of 15 years. 

7 (3) EXECUTIVE LEVEL AND PENSION.—The po8 sition of the Director shall be at level II of the Exec9 utive Schedule, and a Director who serves a full 

10 term, or becomes disabled and unable to fulfill the 

11 responsibilities of the Director after serving at least 

12 10 years, shall receive a pension at retirement equal 

13 to the salary of that person in the last year of the 

14 term, and that pension shall increase in subsequent 

15 years with the increase in the cost of living. 

16 (4) VACANCY.—In the event that a successor is 

17 not nominated and confirmed by the end of the term 

18 of service of a Director, the Director may continue 

19 to serve until such time as the new Director is ap20 pointed and confirmed. 

21 (5) PROHIBITION ON DUAL SERVICE.—The in22 dividual serving in the position of Director may not, 

23 during such service, also serve as the head of any fi24 nancial regulatory agency. 

mstockstill on DSKH9S0YB1PROD with BILLS

22 

•S 3005 IS

1 (6) RESPONSIBILITIES, DUTIES AND AUTHOR2 ITY.—The Director shall have sole discretion to ful3 fill the responsibilities and duties and exercise the 

4 authorities described in this Act, except in cases 

5 where specific authorities have been given to the 

6 Board of Directors. 

7 (c) BOARD OF DIRECTORS.—The Board of Directors 

8 of the Institute shall be comprised of the Director, the 

9 Secretary of the Treasury, and the head of each financial 

10 regulatory agency. 

11 (d) MEMBERSHIP OF THE DIRECTOR ON THE BOARD

12 OF DIRECTORS.—The Director shall serve as a voting 

13 member of the Board of Directors and as a member of 

14 any financial systemic risk regulatory council or agency 

15 established by Congress. 

16 (e) FUNDING.— 

17 (1) ANNUAL BUDGET.—The Director, in con18 sultation with the Board of Directors shall establish 

19 the initial annual budget. For all other annual budg20 ets, the Director shall submit an annual budget for 

21 the Institute to the Board of Directors not later 

22 than April 30 of each year. The Board of Directors 

23 may, without amendment, reject the budget with a 

24 two-thirds majority vote. Each time a budget is re25 jected, the Director shall submit a revised budget to 

mstockstill on DSKH9S0YB1PROD with BILLS

23 

•S 3005 IS

1 the Board of Directors within 60 days, and the 

2 Board of Directors may, without amendment, reject 

3 the budget with a two-thirds majority vote. If the 

4 Board of Directors fails to reject the budget within 

5 60 days of submission by the Director, the budget 

6 shall be automatically approved. If a new budget is 

7 not approved before the existing budget expires, the 

8 most recent approved budget shall continue on a pro 

9 rata basis. Each submitted budget and all votes by 

10 the Board of Directors on each budget shall be part 

11 of the public record of the Board of Directors. 

12 (2) ASSESSMENTS.—The Institute shall be 

13 funded through assessments on the financial entities 

14 required to report data to the Institute. The formula 

15 by which the budgetary costs are allocated among 

16 the reporting entities shall be determined by the 

17 Board of Directors. If the Board of Directors fails 

18 to establish the formula within 60 days of submis19 sion of a budget by the Director, the Director shall 

20 determine the formula by which the budgetary costs 

21 are allocated among the reporting entities for that 

22 year. 

23 (3) INITIAL FUNDING AND START UP.—During 

24 the first 4 years of the operation of the Institute, 

25 the Institute shall have authority to borrow against 

mstockstill on DSKH9S0YB1PROD with BILLS

24 

•S 3005 IS

1 future assessment revenue from the Federal Financ2 ing Bank. Such borrowed funds shall be paid back 

3 to the Federal Financing Bank over a term not to 

4 exceed 20 years. The Secretary of the Treasury, and 

5 any financial regulatory agency, may second per6 sonnel to the Institute to assist the operations of the 

7 Institute. 

8 (f) EXCEPTED SERVICE AGENCY.—The Institute 

9 shall be an excepted service agency. 

10 (g) PERSONNEL.—The Board of Directors may fix 

11 the compensation of Institute personnel, without regard 

12 to the provisions of chapter 51 and subchapter III of chap13 ter 53 of title 5, United States Code, relating to classifica14 tion of positions and General Schedule pay rates. The 

15 rates of pay and benefits shall be competitive with and 

16 comparable to the rates of pay and benefits at Federal 

17 financial regulatory agencies that are not covered by title 

18 5, United States Code. 

19 (h) NON-COMPETE.—The Director and staff of the 

20 Institute, who have had access to the transaction or posi21 tion data maintained by the Data Center or other business 

22 confidential information about financial entities required 

23 to report to the Institute, may not, for a period of 1 year 

24 after last having access to such transaction or position 

25 data or business confidential information, be employed by 

mstockstill on DSKH9S0YB1PROD with BILLS

25 

•S 3005 IS

1 or provide advice or consulting services to a financial enti2 ty, regardless of whether it is required to report to the 

3 Institute. Individual staff members who notify the Direc4 tor of their intention to terminate their employment with 

5 the Institute and to seek employment with a prohibited 

6 employer or in a prohibited activity, shall be transferred 

7 for a period of 12 months to a position that does not pro8 vide access to transaction or position data or other busi9 ness confidential information. For staff whose access to 

10 business confidential information was limited, the Board 

11 of Directors may provide, on a case-by-case basis, for a 

12 shorter period of post-employment prohibition, provided 

13 that the shorter period does not compromise business con14 fidential information. 

15 (i) ADVISORY BOARDS.—The Institute shall maintain 

16 any advisory boards that the Director determines are 

17 needed to complete the mission of the Institute. 

18 (j) FELLOWSHIP PROGRAM.—The Institute may es19 tablish and maintain an academic and professional fellow20 ship program, under which qualified academics and pro21 fessionals shall be invited to spend not longer than 2 years 

22 at the Institute, to perform research and to provide ad23 vanced training for Institute personnel. 

mstockstill on DSKH9S0YB1PROD with BILLS

26 

•S 3005 IS

1 (k) EXECUTIVE SCHEDULE MATTERS.—Section 

2 5312 of title 5, United States Code, is amended by adding 

3 at the end the following new item: 

‘‘Director of the National Institute of Finance.’’. 

4 SEC. 5. ORGANIZATIONAL STRUCTURE; RESPONSIBILITIES 

5 OF PRIMARY PROGRAMMATIC UNITS. 

6 (a) IN GENERAL.—The Institute shall carry out its 

7 programmatic responsibilities through— 

8 (1) the Federal Financial Data Center (in this 

9 Act referred to as the ‘‘Data Center’’); and 

10 (2) the Federal Financial Research and Anal11 ysis Center (in this Act referred to as the ‘‘Research 

12 Center’’). 

13 (b) FEDERAL FINANCIAL DATA CENTER.— 

14 (1) GENERAL DUTIES.—The Data Center shall 

15 collect, validate, and maintain all data necessary to 

16 carry out its duties, as described in this Act. 

17 (2) RESPONSIBILITIES.—The Data Center shall 

18 prepare and publish, in a manner that is easily ac19 cessible to the public— 

20 (A) a financial entity reference database; 

21 (B) a financial instrument reference data22 base; and 

23 (C) formats and standards for reporting fi24 nancial transaction and position data to the In25 stitute. 

mstockstill on DSKH9S0YB1PROD with BILLS

27 

•S 3005 IS

1 (3) DATA TO BE COLLECTED.—Data referred to 

2 in paragraph (1)— 

3 (A) shall include for each financial enti4 ty— 

5 (i) comprehensive financial trans6 action data on a schedule determined by 

7 the Director; 

8 (ii) comprehensive position data on a 

9 schedule determined by the Director; 

10 (iii) for each financial instrument in 

11 the financial instrument reference database 

12 or for any other obligation of a financial 

13 entity that is contingent on the value of an 

14 observable event, where the observable 

15 event is not widely available to the public, 

16 the level and changes in the level of these 

17 observable events, on a schedule deter18 mined by the Director; and 

19 (iv) any other data that are consid20 ered by the Director to be important for 

21 measuring and monitoring systemic risk, 

22 or for determining the soundness of indi23 vidual financial entities; and 

24 (B) may include data regarding policies 

25 and procedures, governance, incentives, commstockstill on DSKH9S0YB1PROD with BILLS

28 

•S 3005 IS

1 pensation practices, contractual relationships, 

2 and any other information deemed by the Di3 rector to be necessary in order for the Institute 

4 to carry out its responsibilities under this Act; 

5 and 

6 (C) the Board of Directors may, by a two7 thirds vote, exclude financial entities, which, as 

8 a group, will not contribute to systemic risk for 

9 reasons such as size, nature of their assets and 

10 liabilities, volume of transactions, or other rea11 sonable purposes, from reporting data. Notwith12 standing such exclusions, financial entities shall 

13 comply with all reporting requirements or en14 sure that reporting requirements are met for 

15 any assets or part of their balance sheets that 

16 are sold to create a financial instrument or obli17 gation, as described in subparagraph (A)(iii). 

18 (4) INFORMATION SECURITY.—The Director 

19 and the Board of Directors shall ensure that data 

20 collected and maintained by the Data Center are 

21 kept secure and protected against unauthorized dis22 closure. 

23 (5) CATALOGUE OF FINANCIAL ENTITIES AND

24 INSTRUMENTS.—The Data Center shall maintain a 

mstockstill on DSKH9S0YB1PROD with BILLS

29 

•S 3005 IS

1 catalogue of the financial entities and instruments 

2 reported to the Institute. 

3 (6) AVAILABILITY TO THE FINANCIAL REGU4 LATORY AGENCIES.—The Data Center shall make 

5 data collected and maintained by the Data Center 

6 available to any financial regulatory agency rep7 resented on the Board of Directors, as needed to 

8 support the regulatory responsibilities of such agen9 cy. 

10 (7) OTHER RESPONSIBILITIES.—The Data Cen11 ter shall oversee the management of the data supply 

12 chain, from the point of issuance, in order to ensure 

13 the quality of all data required to be submitted to 

14 the Institute. 

15 (8) OTHER AUTHORITY.—The Institute shall, 

16 after consultation with the Board of Directors pro17 vide certain data to financial industry participants 

18 and the general public to increase market trans19 parency and facilitate research on the financial sys20 tem, so long as intellectual property rights are not 

21 violated, business confidential information is prop22 erly protected, and the sharing of such information 

23 poses no significant threats to the financial system. 

24 (c) FEDERAL FINANCIAL RESEARCH AND ANALYSIS

25 CENTER.— 

mstockstill on DSKH9S0YB1PROD with BILLS

30 

•S 3005 IS

1 (1) GENERAL DUTIES.—The Research Center 

2 shall develop and maintain the independent analyt3 ical capabilities and computing resources— 

4 (A) to measure and monitor systemic risk; 

5 (B) to perform independent risk assess6 ments of individual financial entities and mar7 kets; 

8 (C) to analyze and investigate relationships 

9 between the soundness of individual financial 

10 entities and markets and the soundness of the 

11 financial system together as a whole; and 

12 (D) to provide advice on the financial sys13 tem. 

14 (2) RESPONSIBILITIES.—The Research Center 

15 shall— 

16 (A) develop and maintain metrics and risk 

17 reporting systems for system-wide risk; 

18 (B) develop and maintain metrics and risk 

19 reporting systems for determining the sound20 ness of financial entities; 

21 (C) monitor, investigate, and report 

22 changes in system-wide risk levels and patterns 

23 to the Board of Directors and Congress, includ24 ing through the collection of additional informamstockstill on DSKH9S0YB1PROD with BILLS

31 

•S 3005 IS

1 tion that the Director deems necessary to un2 derstand such changes; 

3 (D) conduct, coordinate, and sponsor re4 search to support and improve regulation of fi5 nancial entities and markets; 

6 (E) benchmark financial risk management 

7 practices and promote best practices for finan8 cial risk management; 

9 (F) at the direction of the Board of Direc10 tors, or any member of the Board of Directors, 

11 for firms under that member’s purview, develop, 

12 oversee, and report on stress tests or other tests 

13 of the valuation and risk management systems 

14 of any of the financial entities required to re15 port to the Institute; 

16 (G) maintain expertise in such areas as 

17 may be necessary to support specific requests 

18 for advice and assistance from financial regu19 lators; 

20 (H) at the direction of the Board of Direc21 tors or at the request of Congress, conduct 

22 studies and provide advice on financial markets 

23 and products, including advice regarding risks 

24 to consumers posed by financial products and 

25 practices; 

mstockstill on DSKH9S0YB1PROD with BILLS

32 

•S 3005 IS

1 (I) at the direction of the Director, at the 

2 discretion of the Board of Directors, or at the 

3 request of Congress, investigate disruptions and 

4 failures in the financial markets, report find5 ings, and make recommendations to the Board 

6 of Directors and Congress; and 

7 (J) at the direction of the Board of Direc8 tors or at the request of Congress, conduct 

9 studies and provide advice on the impact of 

10 policies related to systemic risk. 

11 (d) REPORTING RESPONSIBILITIES.— 

12 (1) REQUIRED REPORT.—Commencing 2 years 

13 after the date of the establishment of the Institute, 

14 the Institute shall prepare and submit an annual re15 port to Congress, not later than 120 days after the 

16 end of each fiscal year. 

17 (2) CONTENT.—The report required by this 

18 subsection shall assess the state of the financial sys19 tem, including an analysis of any threats to the fi20 nancial system, the status of the Institute’s efforts 

21 in meeting its mission, and key findings from its re22 search and analysis of the financial system. 

23 (3) ADDITIONAL REPORTS.—At the sole discre24 tion of the Director, the Director may initiate and 

25 provide additional reports to Congress regarding the 

mstockstill on DSKH9S0YB1PROD with BILLS

33 

•S 3005 IS

1 state of the financial system. The Director shall no2 tify the Board of Directors of any additional reports 

3 provided to Congress. 

4 SEC. 6. ADMINISTRATIVE AUTHORITIES OF THE INSTITUTE. 

5 The Institute may— 

6 (1) require financial entities to report all data 

7 and information in conformance with reporting 

8 standards, as determined by the Institute, that are 

9 necessary to fulfill the responsibilities of the Insti10 tute under this Act; 

11 (2) require reporting on a worldwide basis from 

12 the financial entities and affiliates thereof that are 

13 organized in the United States; 

14 (3) require reporting of United States-based ac15 tivities by financial entities that are not organized in 

16 the United States; 

17 (4) enforce and apply sanctions on all financial 

18 entities required to report to the Institute that fail 

19 to report data requested by and in standards, fre20 quency, and time frames, as determined by rule or 

21 regulation by the Institute; 

22 (5) share data and information, as well as soft23 ware developed by the Institute, with other financial 

24 regulatory agencies, as determined appropriate by 

25 the Board of Directors, where the shared data and 

mstockstill on DSKH9S0YB1PROD with BILLS

34 

•S 3005 IS

1 software shall be maintained with at least the same 

2 level of security as is used by the Institute, and may 

3 not be shared with any individuals or entities with4 out the permission of the Board of Directors; 

5 (6) purchase and lease software; 

6 (7) sponsor and conduct research projects; and 

7 (8) assist, on a reimbursable basis, with finan8 cial analyses undertaken at the request of govern9 mental agencies, other than financial regulatory 

10 agencies. 

11 SEC. 7. CIVIL PENALTIES. 

12 Any person or entity that violates this Act or fails 

13 to comply with a rule, regulation, or order of the Institute 

14 issued under this Act shall be subject to a civil penalty 

15 in an amount established by the Institute and published 

16 in the Code of Federal Regulations. Each such violation 

17 or failure shall constitute a separate civil offense. 

Æ 

mstockstill on DSKH9S0YB1PROD with BILLS