In the 114 th Congress, the Financial CHOICE Act of 2016 ( H.R. 5983 ) was sponsored by Representative Jeb Hensarling, chairman of the House Committee on Financial Services. The bill was reported by the House Committee on Financial Services on December 20, 2016. In the 115 th Congress, a modified version of the CHOICE Act was introduced as the Financial CHOICE Act of 2017 ( H.R. 10 , FCA) on April 26, 2017. It passed the House on June 8, 2017. This report describes the FCA as passed in the 115 th Congress. The Congressional Budget Office estimated that a similar version of the bill would reduce budget deficits by $33.6 billion over the next 10 years. The FCA is a wide-ranging proposal with 12 titles that would alter many parts of the financial regulatory system. Many of the provisions can be categorized as providing regulatory relief to financial firms, investors, or borrowers. Other provisions alter the financial regulatory architecture or change the relationship between financial regulators and Congress or the judiciary. For background and reference, Table 1 lists the federal financial regulators and their general responsibilities. Many parts of the FCA would repeal or amend provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), a broad package of regulatory reform legislation passed following the 2007-2009 financial crisis that initiated the largest change to the financial regulatory system since at least 1999 (see Appendix A ). President Trump has called for the Dodd-Frank Act to be "dismantled," and Chairman Hensarling has characterized the FCA as "work(ing) with the president to end and replace the Dodd-Frank mistake." The minority on the House Financial Services Committee stated that the FCA "dismantles critical safeguards included in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), the law that was put in place to protect the American economy from another financial crisis. Dodd-Frank improves accountability in the financial system and protects consumers, investors, and the economy from abusive Wall Street practices." Although many of the provisions of the bill focus on parts of the Dodd-Frank Act, others would address long-standing or more recent issues. This report highlights major policy proposals in the version of the bill as passed in the 115 th Congress, but it is not a comprehensive summary of the bill. It provides context for these proposals in the form of background and policy debate. This report also includes an experts' contact list for FCA topics in Appendix C . As financial regulators have implemented the Dodd-Frank Act and other reforms, some Members of Congress argue that the pendulum has swung too far toward excessive regulation. As a result, they argue that additional regulatory burden—the cost associated with government regulation and its implementation—has stymied economic growth and restricted consumer and business access to credit. Other Members, however, contend the current regulatory structure has appropriately strengthened financial stability and increased protections for consumers and investors. They are concerned that regulatory relief for financial institutions could negatively affect consumers and market stability. In determining whether to provide regulatory relief, a central question is whether an appropriate trade-off has been struck between the benefits and costs of regulation. In other words, can relief be provided while maintaining the stability of the financial system and ensuring taxpayers, consumers, and investors are protected, or would relief undermine those goals? Regulatory relief is generally focused on the financial services providers—such as banks, broker-dealers, and other institutions—but what effect would relief have on consumers, investors, particular markets, and market stability more broadly? The answers to these and other policy questions will vary based on the particulars of the relief being proposed. The FCA would provide regulatory relief to two broad categories—banks and securities markets' participants. The FCA would provide regulatory relief to banks through more than two dozen provisions. Some of the proposals are aimed at assisting community banks, whereas others would apply to all banks, regardless of size. Some provisions provide relief from regulations, whereas others target supervisory practices. Many would modify or repeal rules stemming from the Dodd-Frank Act, whereas others target long-standing regulatory practices. This report highlights two provisions providing relief to banks—the Volcker Rule and the leverage ratio. Many of the securities-related provisions in the FCA provide regulatory relief with the aim of facilitating capital formation. Among the over three dozen securities-related provisions in the FCA are provisions that relax restrictions on who is eligible to invest in certain types of securities, including venture capital investors; provisions that relax regulatory requirements on licensed professionals in the securities industry, including private equity advisers, private funds, municipal advisors, investment fund researchers, and credit rating agencies; and provisions that relax regulatory requirements for firms that issue capital or securities, including emerging growth companies, risk retention requirements for nonmortgage securitizers, firms subject to disclosures on conflict minerals, and companies raising funds via crowdfunding or from angel investors. Many of these issues are discussed in further detail below. With more than 500 banks failing between 2007 and 2014, strengthening prudential regulation has been a major goal of postcrisis financial reforms. Prudential regulation covers a broad set of a bank's activities, including assessing whether a bank will be able to meet its obligations during a market downturn, evaluating the quality of its assets and management team, and other factors. One of the main areas of focus is bank capital adequacy. Capital is the difference between the value of a bank's assets and its liabilities and is an indicator of a bank's ability to absorb losses. For example, if a bank has $100 worth of assets and $90 of liabilities, then the bank has capital of $10. If the value of the assets decreases by $5 to $95 and the bank still has $90 in liabilities, then the $5 decline in asset value would be absorbed by the capital, which would decrease from $10 to $5. Capital requirements are stated as the ratio of capital to the bank's assets. Banks are required to satisfy several different capital ratios, but the ratios fall into two main categories: (1) a leverage ratio and (2) a risk-weighted asset ratio. Failure to satisfy the required ratios could lead to regulators taking corrective action against a bank, including ultimately shutting the bank down. Under a leverage ratio, all assets regardless of riskiness are treated the same and the ratio is calculated by dividing capital by assets. A 10% leverage ratio, for example, would imply $10 of capital for every $100 of assets. Under a risk-weighted asset ratio, each asset is assigned a risk weight to account for the fact that some assets are more likely to lose value than others. Riskier assets receive a higher risk weight, which requires banks to hold more capital—and so be better able to absorb losses—to meet the ratio requirement. The specifics of the capital ratios—what the minimum levels are, what qualifies as capital, what the asset risk weights are, what is included in total assets—were proposed by the Basel Committee on Bank Supervision and then implemented by the U.S. financial regulators. The Basel Committee "is the primary global standard-setter for the prudential regulation of banks and provides a forum for cooperation on banking supervisory matters." The most recent comprehensive reform proposal is referred to as Basel III. The capital ratios that a bank must satisfy and how those levels are computed varies based on a bank's size and complexity. The largest banks are required to hold more capital than smaller, less complex banks. In regard to the simple leverage ratio, most banks are required to meet a 4% leverage ratio. Large banks must also comply with a supplementary leverage ratio ranging from 3% to 6% depending on their size and the organizational unit within the bank. The supplementary leverage ratio is more expansive than the leverage ratio because it takes into account certain off-balance-sheet assets and exposures. Some economists argue that it is important to have both a risk-weighted ratio and a leverage ratio because the two complement each other. A basic tenet of finance is that riskier assets have a higher expected rate of return to compensate the investor for bearing more risk. Without risk weighting, banks would have an incentive to hold riskier assets because capital is costly and the same amount of capital must be held against riskier and safer assets. For example, banks might decide to shift out of certain lines of business that involve holding large amounts of safe assets, such as cash, if risk-weighted ratios were replaced by a higher leverage ratio. But relying solely on risk-weighted ratios could be problematic, because the weight assigned to an asset may in fact be an inaccurate measure of its riskiness and therefore distort bank behavior. For example, banks held highly rated mortgage-backed securities (MBSs) before the crisis, in part because those assets had a higher expected rate of return than other assets with the same risk weight. The crisis revealed that MBSs were more risky than their risk weights indicated, and banks holding them suffered unexpectedly large losses. Thus, the leverage ratio can be thought of as a backstop to ensure that incentives posed by risk-weighted capital ratios do not result in a bank holding insufficient capital. Others argue that the risk-weighted system provides "needless complexity" and is an example of "central planning." The complexity generally benefits those largest banks that have the resources to absorb the added regulatory cost. They contend that the risk weights in place prior to the financial crisis were poorly calibrated and "encouraged financial firms to crowd into these" unexpectedly risky assets, exacerbating the downturn. Risk weighting may encourage regulators to set the weights so as "to provide a cheaper source of funding for governments and projects favored by politicians," which can lead to a distortion in credit allocation. Better, they argue, to eliminate the risk-weighted system for those banks that agree to hold more capital and satisfy a higher, simpler leverage ratio.