Collapse to view only § 5370. Safe harbor

§ 5361. Reports by and examinations of nonbank financial companies by the Board of Governors
(a) Reports
(1) In general
The Board of Governors may require each nonbank financial company supervised by the Board of Governors, and any subsidiary thereof, to submit reports under oath, to keep the Board of Governors informed as to—
(A) the financial condition of the company or subsidiary, systems of the company or subsidiary for monitoring and controlling financial, operating, and other risks, and the extent to which the activities and operations of the company or subsidiary pose a threat to the financial stability of the United States; and
(B) compliance by the company or subsidiary with the requirements of this subchapter.
(2) Use of existing reports and information
In carrying out subsection (a), the Board of Governors shall, to the fullest extent possible, use—
(A) reports and supervisory information that a nonbank financial company or subsidiary thereof has been required to provide to other Federal or State regulatory agencies;
(B) information otherwise obtainable from Federal or State regulatory agencies;
(C) information that is otherwise required to be reported publicly; and
(D) externally audited financial statements of such company or subsidiary.
(3) Availability
(4) Data standards for reports under this subsection
(A) In general
(B) Consistency
(b) Examinations
(1) In general
Subject to paragraph (2), the Board of Governors may examine any nonbank financial company supervised by the Board of Governors and any subsidiary of such company, to inform the Board of Governors of—
(A) the nature of the operations and financial condition of the company and such subsidiary;
(B) the financial, operational, and other risks of the company or such subsidiary that may pose a threat to the safety and soundness of such company or subsidiary or to the financial stability of the United States;
(C) the systems for monitoring and controlling such risks; and
(D) compliance by the company or such subsidiary with the requirements of this subchapter.
(2) Use of examination reports and information
(c) Coordination with primary financial regulatory agency
The Board of Governors shall—
(1) provide reasonable notice to, and consult with, the primary financial regulatory agency for any subsidiary before requiring a report or commencing an examination of such subsidiary under this section; and
(2) avoid duplication of examination activities, reporting requirements, and requests for information, to the fullest extent possible.
(Pub. L. 111–203, title I, § 161, July 21, 2010, 124 Stat. 1420; Pub. L. 117–263, div. E, title LVIII, § 5861(a), Dec. 23, 2022, 136 Stat. 3434.)
§ 5362. Enforcement
(a) In general
(b) Enforcement authority for functionally regulated subsidiaries
(1) Referral
(2) Back-up authority of the Board of Governors
(Pub. L. 111–203, title I, § 162, July 21, 2010, 124 Stat. 1421.)
§ 5363. Acquisitions
(a) Acquisitions of banks; treatment as a bank holding company
(b) Acquisition of nonbank companies
(1) Prior notice for large acquisitions
(2) Exemptions
(3) Notice procedures
(4) Standards for review
(5) Hart-Scott-Rodino filing requirement
(Pub. L. 111–203, title I, § 163, July 21, 2010, 124 Stat. 1422; Pub. L. 115–174, title IV, § 401(c)(1)(E), May 24, 2018, 132 Stat. 1358.)
§ 5364. Prohibition against management interlocks between certain financial companies

A nonbank financial company supervised by the Board of Governors shall be treated as a bank holding company for purposes of the Depository Institutions 1

1 So in original. Probably should be “Institution”.
Management Interlocks Act (12 U.S.C. 3201 et seq.), except that the Board of Governors shall not exercise the authority provided in section 7 2
2 So in original. There is no section 7 of such Act.
of that Act (12 U.S.C. 3207) to permit service by a management official of a nonbank financial company supervised by the Board of Governors as a management official of any bank holding company with total consolidated assets equal to or greater than $250,000,000,000, or other nonaffiliated nonbank financial company supervised by the Board of Governors (other than to provide a temporary exemption for interlocks resulting from a merger, acquisition, or consolidation).

(Pub. L. 111–203, title I, § 164, July 21, 2010, 124 Stat. 1423; Pub. L. 115–174, title IV, § 401(c)(1)(F), May 24, 2018, 132 Stat. 1358.)
§ 5365. Enhanced supervision and prudential standards for nonbank financial companies supervised by the Board of Governors and certain bank holding companies
(a) In general
(1) PurposeIn order to prevent or mitigate risks to the financial stability of the United States that could arise from the material financial distress or failure, or ongoing activities, of large, interconnected financial institutions, the Board of Governors shall, on its own or pursuant to recommendations by the Council under section 5325 of this title, establish prudential standards for nonbank financial companies supervised by the Board of Governors and bank holding companies with total consolidated assets equal to or greater than $250,000,000,000 that—
(A) are more stringent than the standards and requirements applicable to nonbank financial companies and bank holding companies that do not present similar risks to the financial stability of the United States; and
(B) increase in stringency, based on the considerations identified in subsection (b)(3).
(2) Tailored application
(A) In general
(B) Adjustment of threshold for application of certain standards
(C) Risks to financial stability and safety and soundnessThe Board of Governors may by order or rule promulgated pursuant to section 553 of title 5 apply any prudential standard established under this section to any bank holding company or bank holding companies with total consolidated assets equal to or greater than $100,000,000,000 to which the prudential standard does not otherwise apply provided that the Board of Governors—
(i) determines that application of the prudential standard is appropriate—(I) to prevent or mitigate risks to the financial stability of the United States, as described in paragraph (1); or(II) to promote the safety and soundness of the bank holding company or bank holding companies; and
(ii) takes into consideration the bank holding company’s or bank holding companies’ capital structure, riskiness, complexity, financial activities (including financial activities of subsidiaries), size, and any other risk-related factors that the Board of Governors deems appropriate.
(b) Development of prudential standards
(1) In general
(A) Required standardsThe Board of Governors shall establish prudential standards for nonbank financial companies supervised by the Board of Governors and bank holding companies described in subsection (a), that shall include—
(i) risk-based capital requirements and leverage limits, unless the Board of Governors, in consultation with the Council, determines that such requirements are not appropriate for a company subject to more stringent prudential standards because of the activities of such company (such as investment company activities or assets under management) or structure, in which case, the Board of Governors shall apply other standards that result in similarly stringent risk controls;
(ii) liquidity requirements;
(iii) overall risk management requirements;
(iv) resolution plan requirements; and
(v) concentration limits.
(B) Additional standards authorizedThe Board of Governors may establish additional prudential standards for nonbank financial companies supervised by the Board of Governors and bank holding companies described in subsection (a), that include—
(i) a contingent capital requirement;
(ii) enhanced public disclosures, including credit exposure reports;
(iii) short-term debt limits; and
(iv) such other prudential standards as the Board or Governors, on its own or pursuant to a recommendation made by the Council in accordance with section 5325 of this title, determines are appropriate.
(2) Standards for foreign financial companiesIn applying the standards set forth in paragraph (1) to any foreign nonbank financial company supervised by the Board of Governors or foreign-based bank holding company, the Board of Governors shall—
(A) give due regard to the principle of national treatment and equality of competitive opportunity; and
(B) take into account the extent to which the foreign financial company is subject on a consolidated basis to home country standards that are comparable to those applied to financial companies in the United States.
(3) ConsiderationsIn prescribing prudential standards under paragraph (1), the Board of Governors shall—
(A) take into account differences among nonbank financial companies supervised by the Board of Governors and bank holding companies described in subsection (a), based on—
(i) the factors described in subsections (a) and (b) of section 5323 of this title;
(ii) whether the company owns an insured depository institution;
(iii) nonfinancial activities and affiliations of the company; and
(iv) any other risk-related factors that the Board of Governors determines appropriate;
(B) to the extent possible, ensure that small changes in the factors listed in subsections (a) and (b) of section 5323 of this title would not result in sharp, discontinuous changes in the prudential standards established under paragraph (1) of this subsection;
(C) take into account any recommendations of the Council under section 5325 of this title; and
(D) adapt the required standards as appropriate in light of any predominant line of business of such company, including assets under management or other activities for which particular standards may not be appropriate.
(4) Consultation
(5) Report
(c) Contingent capital
(1) In general
(2) Factors to considerIn issuing regulations under this subsection, the Board of Governors shall consider—
(A) the results of the study undertaken by the Council, and any recommendations of the Council, under section 5325(c) of this title;
(B) an appropriate transition period for implementation of contingent capital under this subsection;
(C) the factors described in subsection (b)(3)(A);
(D) capital requirements applicable to the nonbank financial company supervised by the Board of Governors or a bank holding company described in subsection (a), and subsidiaries thereof; and
(E) any other factor that the Board of Governors deems appropriate.
(d) Resolution plan and credit exposure reports
(1) Resolution planThe Board of Governors shall require each nonbank financial company supervised by the Board of Governors and bank holding companies described in subsection (a) to report periodically to the Board of Governors, the Council, and the Corporation the plan of such company for rapid and orderly resolution in the event of material financial distress or failure, which shall include—
(A) information regarding the manner and extent to which any insured depository institution affiliated with the company is adequately protected from risks arising from the activities of any nonbank subsidiaries of the company;
(B) full descriptions of the ownership structure, assets, liabilities, and contractual obligations of the company;
(C) identification of the cross-guarantees tied to different securities, identification of major counterparties, and a process for determining to whom the collateral of the company is pledged; and
(D) any other information that the Board of Governors and the Corporation jointly require by rule or order.
(2) Credit exposure reportThe Board of Governors may require each nonbank financial company supervised by the Board of Governors and bank holding companies described in subsection (a) to report periodically to the Board of Governors, the Council, and the Corporation on—
(A) the nature and extent to which the company has credit exposure to other significant nonbank financial companies and significant bank holding companies; and
(B) the nature and extent to which other significant nonbank financial companies and significant bank holding companies have credit exposure to that company.
(3) Review
(4) Notice of deficienciesIf the Board of Governors and the Corporation jointly determine, based on their review under paragraph (3), that the resolution plan of a nonbank financial company supervised by the Board of Governors or a bank holding company described in subsection (a) is not credible or would not facilitate an orderly resolution of the company under title 11—
(A) the Board of Governors and the Corporation shall notify the company of the deficiencies in the resolution plan; and
(B) the company shall resubmit the resolution plan within a timeframe determined by the Board of Governors and the Corporation, with revisions demonstrating that the plan is credible and would result in an orderly resolution under title 11, including any proposed changes in business operations and corporate structure to facilitate implementation of the plan.
(5) Failure to resubmit credible plan
(A) In general
(B) DivestitureThe Board of Governors and the Corporation, in consultation with the Council, may jointly direct a nonbank financial company supervised by the Board of Governors or a bank holding company described in subsection (a), by order, to divest certain assets or operations identified by the Board of Governors and the Corporation, to facilitate an orderly resolution of such company under title 11, in the event of the failure of such company, in any case in which—
(i) the Board of Governors and the Corporation have jointly imposed more stringent requirements on the company pursuant to subparagraph (A); and
(ii) the company has failed, within the 2-year period beginning on the date of the imposition of such requirements under subparagraph (A), to resubmit the resolution plan with such revisions as were required under paragraph (4)(B).
(6) No limiting effect
(7) No private right of action
(8) Rules
(e) Concentration limits
(1) Standards
(2) Limitation on credit exposure
(3) Credit exposureFor purposes of paragraph (2), “credit exposure” to a company means—
(A) all extensions of credit to the company, including loans, deposits, and lines of credit;
(B) all repurchase agreements and reverse repurchase agreements with the company, and all securities borrowing and lending transactions with the company, to the extent that such transactions create credit exposure for the nonbank financial company supervised by the Board of Governors or a bank holding company described in subsection (a);
(C) all guarantees, acceptances, or letters of credit (including endorsement or standby letters of credit) issued on behalf of the company;
(D) all purchases of or investment in securities issued by the company;
(E) counterparty credit exposure to the company in connection with a derivative transaction between the nonbank financial company supervised by the Board of Governors or a bank holding company described in subsection (a) and the company; and
(F) any other similar transactions that the Board of Governors, by regulation, determines to be a credit exposure for purposes of this section.
(4) Attribution rule
(5) Rulemaking
(6) Exemptions
(7) Transition period
(A) In general
(B) Extension authorized
(f) Enhanced public disclosures
(g) Short-term debt limits
(1) In general
(2) Basis of limit
(3) Short-term debt defined
(4) Rulemaking authority
(5) Authority to issue exemptions and adjustments
(h) Risk committee
(1) Nonbank financial companies supervised by the Board of Governors
(2) Certain bank holding companies
(A) Mandatory regulations
(B) Permissive regulations
(3) Risk committeeA risk committee required by this subsection shall—
(A) be responsible for the oversight of the enterprise-wide risk management practices of the nonbank financial company supervised by the Board of Governors or bank holding company described in subsection (a), as applicable;
(B) include such number of independent directors as the Board of Governors may determine appropriate, based on the nature of operations, size of assets, and other appropriate criteria related to the nonbank financial company supervised by the Board of Governors or a bank holding company described in subsection (a), as applicable; and
(C) include at least 1 risk management expert having experience in identifying, assessing, and managing risk exposures of large, complex firms.
(4) Rulemaking
(i) Stress tests
(1) By the Board of Governors
(A) Annual tests required
(B) Test parameters and consequencesThe Board of Governors—
(i) shall provide for at least 2 different sets of conditions under which the evaluation required by this subsection shall be conducted, including baseline and severely adverse;
(ii) may require the tests described in subparagraph (A) at bank holding companies and nonbank financial companies, in addition to those for which annual tests are required under subparagraph (A);
(iii) may develop and apply such other analytic techniques as are necessary to identify, measure, and monitor risks to the financial stability of the United States;
(iv) shall require the companies described in subparagraph (A) to update their resolution plans required under subsection (d)(1), as the Board of Governors determines appropriate, based on the results of the analyses; and
(v) shall publish a summary of the results of the tests required under subparagraph (A) or clause (ii) of this subparagraph.
(2) By the company
(A) Requirement
(B) Report
(C) RegulationsEach Federal primary financial regulatory agency, in coordination with the Board of Governors and the Federal Insurance Office, shall issue consistent and comparable regulations to implement this paragraph that shall—
(i) define the term “stress test” for purposes of this paragraph;
(ii) establish methodologies for the conduct of stress tests required by this paragraph that shall provide for at least 2 different sets of conditions, including baseline and severely adverse;
(iii) establish the form and span of the report required by subparagraph (B); and
(iv) require companies subject to this paragraph to publish a summary of the results of the required stress tests.
(j) Leverage limitation
(1) Requirement
(2) Considerations
(3) Regulations
(k) Inclusion of off-balance-sheet activities in computing capital requirements
(1) In general
(2) Exemptions
(3) Off-balance-sheet activities definedFor purposes of this subsection, the term “off-balance-sheet activities” means an existing liability of a company that is not currently a balance sheet liability, but may become one upon the happening of some future event, including the following transactions, to the extent that they may create a liability:
(A) Direct credit substitutes in which a bank substitutes its own credit for a third party, including standby letters of credit.
(B) Irrevocable letters of credit that guarantee repayment of commercial paper or tax-exempt securities.
(C) Risk participations in bankers’ acceptances.
(D) Sale and repurchase agreements.
(E) Asset sales with recourse against the seller.
(F) Interest rate swaps.
(G) Credit swaps.
(H) Commodities contracts.
(I) Forward contracts.
(J) Securities contracts.
(K) Such other activities or transactions as the Board of Governors may, by rule, define.
(Pub. L. 111–203, title I, § 165, July 21, 2010, 124 Stat. 1423; Pub. L. 115–174, title IV, § 401(a), May 24, 2018, 132 Stat. 1356.)
§ 5366. Early remediation requirements
(a) In general
(b) Purpose of the early remediation requirements
(c) Remediation requirementsThe regulations prescribed by the Board of Governors under subsection (a) shall—
(1) define measures of the financial condition of the company, including regulatory capital, liquidity measures, and other forward-looking indicators; and
(2) establish requirements that increase in stringency as the financial condition of the company declines, including—
(A) requirements in the initial stages of financial decline, including limits on capital distributions, acquisitions, and asset growth; and
(B) requirements at later stages of financial decline, including a capital restoration plan and capital-raising requirements, limits on transactions with affiliates, management changes, and asset sales.
(Pub. L. 111–203, title I, § 166, July 21, 2010, 124 Stat. 1432.)
§ 5367. Affiliations
(a) Affiliations
(b) Requirement
(1) In general
(A) Board authority
(B) Necessary actions
Notwithstanding subparagraph (A), the Board of Governors shall require a nonbank financial company supervised by the Board of Governors to establish an intermediate holding company if the Board of Governors makes a determination that the establishment of such intermediate holding company is necessary to—
(i) appropriately supervise activities that are determined to be financial in nature or incidental thereto; or
(ii) to 1
1 So in original. The word “to” probably should not appear.
ensure that supervision by the Board of Governors does not extend to the commercial activities of such nonbank financial company.
(2) Internal financial activities
(3) Source of strength
(4) Parent company reports
(5) Limited parent company enforcement
(A) In general
(B) Application of other Act
(C) No effect on other authority
(c) Regulations
The Board of Governors—
(1) shall promulgate regulations to establish the criteria for determining whether to require a nonbank financial company supervised by the Board of Governors to establish an intermediate holding company under subsection (b); and
(2) may promulgate regulations to establish any restrictions or limitations on transactions between an intermediate holding company or a nonbank financial company supervised by the Board of Governors and its affiliates, as necessary to prevent unsafe and unsound practices in connection with transactions between such company, or any subsidiary thereof, and its parent company or affiliates that are not subsidiaries of such company, except that such regulations shall not restrict or limit any transaction in connection with the bona fide acquisition or lease by an unaffiliated person of assets, goods, or services.
(Pub. L. 111–203, title I, § 167, July 21, 2010, 124 Stat. 1432.)
§ 5368. Regulations

The Board of Governors shall have authority to issue regulations to implement parts A and C and the amendments made thereunder. Except as otherwise specified in part A or C, not later than 18 months after the effective date of this Act, the Board of Governors shall issue final regulations to implement parts A and C, and the amendments made thereunder.

(Pub. L. 111–203, title I, § 168, July 21, 2010, 124 Stat. 1434.)
§ 5369. Avoiding duplication

The Board of Governors shall take any action that the Board of Governors deems appropriate to avoid imposing requirements under this part that are duplicative of requirements applicable to bank holding companies and nonbank financial companies under other provisions of law.

(Pub. L. 111–203, title I, § 169, July 21, 2010, 124 Stat. 1434.)
§ 5370. Safe harbor
(a) Regulations
(b) Considerations
(c) Rule of construction
(d) Revisions
(1) In general
(2) Transition period
(e) Report
(Pub. L. 111–203, title I, § 170, July 21, 2010, 124 Stat. 1435.)
§ 5371. Leverage and risk-based capital requirements
(a) Definitions
For purposes of this section, the following definitions shall apply:
(1) Generally applicable leverage capital requirements
(A) the minimum ratios of tier 1 capital to average total assets, as established by the appropriate Federal banking agencies to apply to insured depository institutions under the prompt corrective action regulations implementing section 1831o of this title, regardless of total consolidated asset size or foreign financial exposure; and
(B) includes the regulatory capital components in the numerator of that capital requirement, average total assets in the denominator of that capital requirement, and the required ratio of the numerator to the denominator.
(2) Generally applicable risk-based capital requirements
The term “generally applicable risk-based capital requirements” means—
(A) the risk-based capital requirements, as established by the appropriate Federal banking agencies to apply to insured depository institutions under the prompt corrective action regulations implementing section 1831o of this title, regardless of total consolidated asset size or foreign financial exposure; and
(B) includes the regulatory capital components in the numerator of those capital requirements, the risk-weighted assets in the denominator of those capital requirements, and the required ratio of the numerator to the denominator.
(3) Definition of depository institution holding company
(4) Business of insurance
(5) Person regulated by a State insurance regulator
(6) Regulated foreign subsidiary and regulated foreign affiliate
The terms “regulated foreign subsidiary” and “regulated foreign affiliate” mean a person engaged in the business of insurance in a foreign country that is regulated by a foreign insurance regulatory authority that is a member of the International Association of Insurance Supervisors or other comparable foreign insurance regulatory authority as determined by the Board of Governors following consultation with the State insurance regulators, including the lead State insurance commissioner (or similar State official) of the insurance holding company system as determined by the procedures within the Financial Analysis Handbook adopted by the National Association of Insurance Commissioners, where the person, or its principal United States insurance affiliate, has its principal place of business or is domiciled, but only to the extent that—
(A) such person acts in its capacity as a regulated insurance entity; and
(B) the Board of Governors does not determine that the capital requirements in a specific foreign jurisdiction are inadequate.
(7) Capacity as a regulated insurance entity
The term “capacity as a regulated insurance entity”—
(A) includes any action or activity undertaken by a person regulated by a State insurance regulator or a regulated foreign subsidiary or regulated foreign affiliate of such person, as those actions relate to the provision of insurance, or other activities necessary to engage in the business of insurance; and
(B) does not include any action or activity, including any financial activity, that is not regulated by a State insurance regulator or a foreign agency or authority and subject to State insurance capital requirements or, in the case of a regulated foreign subsidiary or regulated foreign affiliate, capital requirements imposed by a foreign insurance regulatory authority.
(b) Minimum capital requirements
(1) Minimum leverage capital requirements
(2) Minimum risk-based capital requirements
(3) Investments in financial subsidiaries
(4) Effective dates and phase-in periods
(A) Debt or equity instruments on or after May 19, 2010
(B) Debt or equity instruments issued before May 19, 2010
(C) Debt or equity instruments of smaller institutions
(D) Depository institution holding companies not previously supervised by the Board of Governors
(E) Certain bank holding company subsidiaries of foreign banking organizations
(5) Exceptions
This section shall not apply to—
(A) debt or equity instruments issued to the United States or any agency or instrumentality thereof pursuant to the Emergency Economic Stabilization Act of 2008 [12 U.S.C. 5201 et seq.], and prior to October 4, 2010;
(B) any Federal home loan bank; or
(C) any bank holding company or savings and loan holding company that is subject to the application of appendix C to part 225 of title 12, Code of Federal Regulations (commonly known as the “Small Bank Holding Company and Savings and Loan Holding Company Policy Statement”).
(6) Study and report on small institution access to capital
(A) Study required
(B) Scope
(C) Report to Congress
(7) Capital requirements to address activities that pose risks to the financial system
(A) In general
(B) Content
Such rules shall address, at a minimum, the risks arising from—
(i) significant volumes of activity in derivatives, securitized products purchased and sold, financial guarantees purchased and sold, securities borrowing and lending, and repurchase agreements and reverse repurchase agreements;
(ii) concentrations in assets for which the values presented in financial reports are based on models rather than historical cost or prices deriving from deep and liquid 2-way markets; and
(iii) concentrations in market share for any activity that would substantially disrupt financial markets if the institution is forced to unexpectedly cease the activity.
(c) Clarification
(1) In general
(2) Rule of construction on Board’s authority
(3) Rule of construction on accounting principles
(A) In general
(B) Preservation of authority
(Pub. L. 111–203, title I, § 171, July 21, 2010, 124 Stat. 1435; Pub. L. 113–250, § 2(a), Dec. 18, 2014, 128 Stat. 2886; Pub. L. 113–279, § 2, Dec. 18, 2014, 128 Stat. 3017; Pub. L. 114–94, div. G, title LXXXVII, § 87001, Dec. 4, 2015, 129 Stat. 1798; Pub. L. 115–174, title II, § 207(d), May 24, 2018, 132 Stat. 1312.)
§ 5372. Rule of construction

Nothing in this Act shall be construed to limit or curtail the Corporation’s current authority to examine or bring enforcement actions with respect to any insured depository institution or institution-affiliated party.

(Pub. L. 111–203, title I, § 172(c), July 21, 2010, 124 Stat. 1439.)
§ 5373. International policy coordination
(a) By the President
(b) By the Council
(c) By the Board of Governors and the Secretary
(Pub. L. 111–203, title I, § 175, July 21, 2010, 124 Stat. 1442.)
§ 5374. Rule of construction

No regulation or standard imposed under this subchapter may be construed in a manner that would lessen the stringency of the requirements of any applicable primary financial regulatory agency or any other Federal or State agency that are otherwise applicable. This subchapter, and the rules and regulations or orders prescribed pursuant to this subchapter, do not divest any such agency of any authority derived from any other applicable law.

(Pub. L. 111–203, title I, § 176, July 21, 2010, 124 Stat. 1442.)