Title: Systemic Risk Mitigation Act of 2020
Policy area: Finance and Financial Sector

Summary:
Systemic Risk Mitigation Act of 2020
This bill automatically designates certain nonbank financial companies as systemically important, which subjects these companies to certain prudential standards, including capital and liquidity rules, annual stress tests, and living wills requirements. This designation may be rescinded by the Financial Stability Oversight Council upon further review.
The bill provides the council with rulemaking authority regarding an activity or practice that increases risk to the financial system.
The bill creates the Climate Change Subcommittee within the council to address the risk climate change poses to the financial system.
The bill also revises administrative provisions of the council, including those regarding staffing, funding, and meetings.

[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6501 Introduced in House (IH)]

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116th CONGRESS
  2d Session
                                H. R. 6501

To strengthen the Financial Stability Oversight Council, and for other 
                               purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             April 14, 2020

  Mr. Garcia of Illinois (for himself, Ms. Porter, Mr. Grijalva, Ms. 
    Schakowsky, Mr. McGovern, Ms. Norton, and Mr. Danny K. Davis of 
  Illinois) introduced the following bill; which was referred to the 
                    Committee on Financial Services

_______________________________________________________________________

                                 A BILL


 
To strengthen the Financial Stability Oversight Council, and for other 
                               purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Systemic Risk Mitigation Act of 
2020''.

SEC. 2. MEMBER AGENCY FINANCIAL STABILITY MANDATE.

    (a) In General.--Subtitle A of the Financial Stability Act of 2010 
(12 U.S.C. 5321 et seq.) is amended by adding at the end the following:

``SEC. 124. MEMBER AGENCY FINANCIAL STABILITY MANDATE.

    ``Each member agency shall have, as part of the agency's mission, a 
mandate to ensure the financial stability of the United States.''.
    (b) Clerical Amendment.--The table of contents for the Dodd-Frank 
Wall Street Reform and Consumer Protection Act is amended by inserting 
after the item relating to section 123 the following:

``Sec. 124. Member agency financial stability mandate.''.

SEC. 3. AUTOMATIC DESIGNATION OF CERTAIN LARGE NONBANK FINANCIAL 
              COMPANIES.

    (a) In General.--The Financial Stability Act of 2010 (12 U.S.C. 
5311 et seq.) is amended by inserting after section 113 the following:

``SEC. 113A. AUTOMATIC DESIGNATION OF CERTAIN LARGE NONBANK FINANCIAL 
              COMPANIES.

    ``(a) Notice of Automatic Designation.--If a nonbank financial 
company meets the criteria described in subsection (b), the Council 
shall notify such nonbank financial company that if, on the date that 
is 9 months after the date on which the notice is sent, such nonbank 
financial company meets the criteria described in subsection (b), such 
nonbank financial company shall be deemed to be designated as 
systemically important.
    ``(b) Criteria.--
            ``(1) In general.--A nonbank financial company meets the 
        criteria described in this subsection if such nonbank financial 
        company satisfies--
                    ``(A) the asset criteria in paragraph (2) and the 
                other criteria in paragraph (3); or
                    ``(B) the criteria for an investment adviser that 
                is registered with the Commission under the Investment 
                Advisers Act of 1940 in paragraph (4).
            ``(2) Asset criteria.--A nonbank financial company 
        satisfies the asset criteria in this paragraph if such nonbank 
        financial company has--
                    ``(A) in the case of a company that would be an 
                investment company (as defined in the Investment 
                Company Act of 1940) but for section 3(c)(1) or 3(c)(7) 
                of that Act, $400,000,000,000 or more in gross notional 
                exposure (as defined in Form PF) individually or in 
                combination with any feeder funds, parallel funds, or 
                dependent parallel managed accounts of the company; or
                    ``(B) in the case of any nonbank financial company 
                not described under subparagraph (A) or paragraph (4), 
                $50,000,000,000 or more in consolidated assets.
            ``(3) Other criteria.--A nonbank financial company 
        satisfies the criteria in this paragraph if such nonbank 
        financial company has--
                    ``(A) $30,000,000,000 or more in gross notional 
                credit default swaps outstanding for which the nonbank 
                financial company is the reference entity;
                    ``(B) $3,500,000,000 or more of derivatives 
                liabilities;
                    ``(C) $20,000,000,000 or more in total debt 
                outstanding;
                    ``(D) a 15-1, or higher, leverage ratio; or
                    ``(E) a 10 percent, or higher, short-term debt 
                ratio.
            ``(4) Investment adviser criteria.--With respect to an 
        investment adviser that is registered with the Commission under 
        the Investment Advisers Act of 1940, the criteria in this 
        paragraph is that the investment adviser has more than 
        $1,500,000,000,000 in assets under management.
    ``(c) Rescission of Designation.--
            ``(1) In general.--With respect to a nonbank financial 
        company designated as systemically important under subsection 
        (a), if the Council determines that neither material financial 
        distress at the nonbank financial company, nor the nature, 
        scope, size, scale, concentration, interconnectedness, or mix 
        of the activities of the nonbank financial company, could pose 
        a threat to the financial stability of the United States, the 
        Council may rescind such designation (in this subsection 
        referred to as a `rescission determination') for a period of 2 
        years.
            ``(2) Authority to renew rescission.--The Council may renew 
        a rescission determination made under paragraph (1) for an 
        unlimited number of additional 2-year periods, if the Council 
        makes a new determination that the nonbank financial company 
        meets the criteria described under paragraph (1) at the 
        beginning of each such renewal.
            ``(3) Authority to review rescission.--The Chairperson may 
        review the status of a nonbank financial company with respect 
        to a rescission determination before the end of a 2-year period 
        described under paragraph (1) or (2) for any reason. The 
        Chairperson shall notify the members of the Council of such 
        review and shall call a vote to renew the rescission 
        determination within 7 days of such notification. If the 
        Council fails to renew the rescission determination, the 
        nonbank financial company shall be deemed once again to be 
        designated as systemically important.
    ``(d) Automatic Rescission of Designation.--If a nonbank financial 
company does not meet the criteria described in subsection (b) for 9 
consecutive months, the Council shall immediately, and automatically 
rescind the designation of the nonbank financial company as 
systemically important.
    ``(e) Application.--For purposes of this section, the term `nonbank 
financial company' does not include a Government-sponsored enterprise 
or an investment company registered with the Commission under the 
Investment Company Act of 1940.
    ``(f) Definition.--In this section and with respect to a nonbank 
financial company, the term `designated as systemically important' 
means the nonbank financial company is subject to a determination under 
section 113 that the nonbank financial company shall be supervised by 
the Board of Governors and shall be subject to prudential standards, in 
accordance with this title.''.
    (b) Clerical Amendment.--The table of contents for the Dodd-Frank 
Wall Street Reform and Consumer Protection Act is amended by inserting 
after the item relating to section 113 the following:

``Sec. 113A. Automatic designation of certain large nonbank financial 
                            companies.''.
    (c) Effective Date.--This section and the amendments made by this 
section shall take effect not later than 9 months after the date of the 
enactment of this Act.

SEC. 4. COUNCIL REGULATION OF SYSTEMICALLY RISKY ACTIVITIES.

    (a) In General.--Subtitle A of the Financial Stability Act of 2010 
(12 U.S.C. 5321 et seq.), as amended by section 2, is further amended 
by adding at the end the following:

``SEC. 125. COUNCIL REGULATION OF SYSTEMICALLY RISKY ACTIVITIES.

    ``(a) Authority of the Council.--Subject to subsection (b), the 
Council shall issue such rules as may be required to regulate an 
activity or practice if the Council determines that the conduct, scope, 
nature, size, scale, concentration, or interconnectedness of such 
activity or practice could create or increase the risk of significant 
liquidity, credit, or other problems spreading among bank holding 
companies and nonbank financial companies, financial markets of the 
United States, or low-income, minority, or under-served communities.
    ``(b) Council Delegation to the Primary Regulator.--With respect to 
an activity or practice that the council determines meets the standard 
outlined in subsection (a)--
            ``(1) the Council shall issue recommendations to the 
        primary regulator for a rulemaking to address the risk posed by 
        the activity, and provide the primary regulator with a 12-month 
        period to issue a final rule to address such risk; and
            ``(2) if the primary regulator does not issue such a final 
        rule within the period described under paragraph (1) or the 
        Council determines that such final rule is insufficient to 
        address the risk, the Council may--
                    ``(A) terminate such final rule, if applicable; and
                    ``(B) issue a rule to address the risk.
    ``(c) Backup Authority of the Council for Member Agency 
Rulemakings.--With respect to any rulemaking required of a member 
agency by Federal statute, if the member agency does not issue the rule 
within the time frame required by such Federal statute, the Council may 
issue such rule in place of the member agency.
    ``(d) Primary Regulator Defined.--With respect to an activity, the 
term `primary regulator' means--
            ``(1) one or more member agencies that the Council 
        determines are primarily responsible for regulating the 
        activity; or
            ``(2) if the Council cannot make a determination under 
        paragraph (1), the member agency that the Council determines is 
        the best choice to serve as the primary regulator with respect 
        to such activity.''.
    (b) Clerical Amendment.--The table of contents for the Dodd-Frank 
Wall Street Reform and Consumer Protection Act, as amended by section 
2, is further amended by inserting after the item relating to section 
124 the following:

``Sec. 125. Council regulation of systemically risky activities.''.

SEC. 5. MINIMUM STAFFING AND FUNDING LEVELS FOR THE COUNCIL AND THE 
              OFFICE OF FINANCIAL RESEARCH.

    (a) In General.--The Financial Stability Act of 2010 (12 U.S.C. 
5311 et seq.) is amended--
            (1) in section 118--
                    (A) in the section heading, by adding ``and 
                staffing'' at the end;
                    (B) by striking ``Any expenses'' and inserting the 
                following:
    ``(a) Expenses.--Any expenses'';
                    (C) by inserting after ``Office of Financial 
                Research.'' the following: ``The Office of Financial 
                Research shall transfer a minimum of $18,000,000 to the 
                Council each year (adjusted for inflation) to pay for 
                the costs of the Council in carrying out the duties and 
                responsibilities of the Council.''; and
                    (D) by adding at the end the following:
    ``(b) Minimum Staffing Levels.--The Council shall maintain a 
minimum staff of 75 employees.'';
            (2) in section 152--
                    (A) in subsection (c), by striking ``, in 
                consultation with the Chairperson,''; and
                    (B) in subsection (d)(1)--
                            (i) by striking ``, in consultation with 
                        the Chairperson,''; and
                            (ii) by inserting before the period at the 
                        end the following: ``, except that the Office 
                        shall maintain a minimum staff of 300 
                        employees'';
            (3) in section 153(b)--
                    (A) in paragraph (2), by striking ``and'' at the 
                end;
                    (B) in paragraph (3), by striking the period on the 
                end and inserting ``; and''; and
                    (C) by adding at the end the following:
            ``(4) require any member agency to produce such data and 
        other information as the Director may determine necessary to 
        carry out the duties of the Office.''; and
            (4) in section 155(d)--
                    (A) by striking ``the Secretary'' and inserting 
                ``the Office''; and
                    (B) by adding at the end the following: ``The 
                aggregate amount of assessments under this subsection 
                with respect to a calendar year shall not be less than 
                $168,000,000 (adjusted for inflation).''.
    (b) Clerical Amendment.--The table of contents for the Dodd-Frank 
Wall Street Reform and Consumer Protection Act is amended in the item 
relating to section 118 by adding at the end the following: ``and 
staffing''.

SEC. 6. TRANSPARENCY IN OPERATIONS OF THE FINANCIAL STABILITY OVERSIGHT 
              COUNCIL.

    (a) Meetings.--Section 111(e) of the Financial Stability Act of 
2010 (12 U.S.C. 5321(e)) is amended--
            (1) in paragraph (1), by striking ``not less frequently 
        than quarterly.'' and inserting ``not less frequently than 
        twice each quarter. At least 1 of such quarterly meetings shall 
        be open to the public.''; and
            (2) by adding at the end the following:
            ``(3) Transcripts.--The Council shall publicly release 
        transcripts of meetings held pursuant to paragraph (1) not 
        later than 5 years after the date of such meeting.''.
    (b) Testimony.--Section 112(c) of the Financial Stability Act of 
2010 (12 U.S.C. 5322(c)) is amended--
            (1) in the subsection heading, by striking ``by the 
        Chairperson''; and
            (2) by inserting ``and each voting member of the Council'' 
        after ``The Chairperson''.
    (c) Member Agency Statements.--Section 112 of the Financial 
Stability Act of 2010 (12 U.S.C. 5322) is amended by adding at the end 
the following:
    ``(e) Member Agency Statements.--After providing testimony pursuant 
to subsection (c), the head of each member agency shall submit to 
Congress a signed statement--
            ``(1) affirming that the member agency is taking all 
        reasonable steps to ensure financial stability and to mitigate 
        systemic risk that would negatively affect the economy; or
            ``(2) detailing additional steps that the member agency 
        should take to ensure financial stability and to mitigate 
        systemic risk that would negatively affect the economy.''.

SEC. 7. CLIMATE CHANGE SUBCOMMITTEE.

    (a) In General.--Subtitle A of the Financial Stability Act of 2010 
(12 U.S.C. 5321 et seq.), as amended by section 4, is further amended 
by adding at the end the following:

``SEC. 126. CLIMATE CHANGE SUBCOMMITTEE.

    ``(a) In General.--The Council shall establish a subcommittee of 
the Council that shall support the Council in identifying risks to, and 
in responding to emerging threats to, the stability of the United 
States financial system as a result of climate change.
    ``(b) Responsibilities.--
            ``(1) Subcommittee.--The subcommittee established under 
        subsection (a) shall, not later than 1 year after the date of 
        enactment of this section, and in consultation with the Office 
        of Financial Research, submit to Congress an assessment of the 
        risk posed by climate change to the efficiency, 
        competitiveness, and stability of the United States financial 
        system as a whole.
            ``(2) Council.--For each year after the year in which the 
        assessment required under paragraph (1) is submitted, the 
        Financial Stability Oversight Council shall include in the 
        annual report required under section 112(a)(2)(N) an update to 
        that assessment.
    ``(c) Composition.--The subcommittee established under subsection 
(a) shall be composed of--
            ``(1) the Chairman of the Board of Governors of the Federal 
        Reserve System;
            ``(2) the Secretary of the Treasury;
            ``(3) the Comptroller of the Currency;
            ``(4) the Chairperson of the Board of Directors of the 
        Federal Deposit Insurance Corporation;
            ``(5) the Chairman of the Securities and Exchange 
        Commission;
            ``(6) the Chairperson of the Commodity Futures Trading 
        Commission; and
            ``(7) any other voting or nonvoting members that the 
        Council determines to be appropriate.''.
    (b) Clerical Amendment.--The table of contents for the Dodd-Frank 
Wall Street Reform and Consumer Protection Act, as amended by section 
4, is further amended by inserting after the item relating to section 
125 the following:

``Sec. 126. Climate change subcommittee.''.
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