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(B) LOSS OF ELECTION AFTER ONE-YEAR REMEDIATION PERIOD.—If a banking organization described under subparagraph (A) does not, within the 1-year period beginning on the date of such determination, raise the organization’s quarterly leverage ratio for a calendar quarter ending in such 1-year period to at least 10 percent, the banking organization’s election under this section shall be terminated, and the appropriate Federal banking agency shall notify any applicable State bank supervisor that regulates the banking organization of such termination. (C) EFFECT OF SUBSIDIARY ON PARENT ORGANIZATION.—With respect to a qualifying banking organization described under subparagraph (A) that is an insured depository institution, any parent depository institution holding company of the qualifying banking organization shall— (i) if the appropriate Federal banking agency determines it appropriate, be prohibited from making a capital distribution (other than a capital contribution to such qualifying banking organization described under subparagraph (A)); and (ii) if the qualifying banking organization has an election terminated under subparagraph (B), any such parent depository institution holding company shall also have its election under this section terminated. (2) IMMEDIATE LOSS OF ELECTION IF THE QUARTERLY LEVERAGE RATIO FALLS BELOW 6 PERCENT.— (A) IN GENERAL.—If, with respect to the most recently completed calendar quarter, the appropriate Federal banking agency determines that a qualifying banking organization’s quarterly leverage ratio is below 6 percent, the banking organization’s election under this section shall be terminated, and the appropriate Federal banking agency shall notify any applicable State bank supervisor that regulates the banking organization of such termination. (B) EFFECT OF SUBSIDIARY ON PARENT ORGANIZATION.—With respect to a qualifying banking organization described under subparagraph (A) that is an insured depository institution, any parent depository institution holding company of the qualifying banking organization shall also have its election under this section terminated. (3) ABILITY TO MAKE FUTURE ELECTIONS.—If a banking organization has an election under this section terminated, the banking organization may not apply for another election under this section until the banking organization has maintained a quarterly leverage ratio of at least 10 percent for 8 consecutive calendar quarters. SEC. 602. REGULATORY RELIEF. (a) IN GENERAL.—A qualifying banking orga-
nization shall be exempt from the following: (1) Any Federal law, rule, or regulation addressing capital or liquidity requirements or standards. (2) Any Federal law, rule, or regulation that permits an appropriate Federal banking agency to object to a capital distribution. (3) Any consideration by an appropriate Federal banking agency of the following: (A) Any risk the qualifying banking organization may pose to ‘‘the stability of the financial system of the United States’’, under section 5(c)(2) of the Bank Holding Company Act of 1956. (B) The ‘‘extent to which a proposed acquisition, merger, or consolidation would result in greater or more concentrated risks to the stability of the United States banking or financial system’’, under section 3(c)(7) of the Bank Holding Company Act of 1956, so long as the banking organization, after such proposed acquisition, merger, or consolidation, would maintain a quarterly leverage ratio of at least 10 percent. (C) Whether the performance of an activity by the banking organization could possibly pose a ‘‘risk to the stability of the United States banking or financial system’’, under section 4(j)(2)(A) of the Bank Holding Company Act of 1956.
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(D) Whether the acquisition of control of shares of a company engaged in an activity described in section 4(j)(1)(A) of the Bank Holding Company Act of 1956 could possibly pose a ‘‘risk to the stability of the United States banking or financial system’’, under section 4(j)(2)(A) of the Bank Holding Company Act of 1956, so long as the banking organization, after acquiring control of such company, would maintain a quarterly leverage ratio of at least 10 percent. (E) Whether a merger would pose a ‘‘risk to the stability of the United States banking or financial system’’, under section 18(c)(5) of the Federal Deposit Insurance Act, so long as the banking organization, after such proposed merger, would maintain a quarterly leverage ratio of at least 10 percent. (F) Any risk the qualifying banking organization may pose to ‘‘the stability of the financial system of the United States’’, under section 10(b)(4) of the Home Owners’ Loan Act. (4) Subsections (i)(8) and (k)(6)(B)(ii) of section 4 and section 14 of the Bank Holding Company Act of 1956. (5) Section 18(c)(13) of the Federal Deposit Insurance Act. (6) Section 163 of the Financial Stability Act of 2010. (7) Section 10(e)(2)(E) of the Home Owners’ Loan Act. (8) Any Federal law, rule, or regulation implementing standards of the type provided for in subsections (b), (c), (d), (e), (g), (h), (i), and (j) of section 165 of the Financial Stability Act of 2010. (9) Any Federal law, rule, or regulation providing limitations on mergers, consolidations, or acquisitions of assets or control, to the extent such limitations relate to capital or liquidity standards or concentrations of deposits or assets, so long as the banking organization, after such proposed merger, consolidation, or acquisition, would maintain a quarterly leverage ratio of at least 10 percent. (b) QUALIFYING BANKING ORGANIZATIONS TREATED AS WELL CAPITALIZED.—A qualifying banking organization shall be deemed to be ‘‘well capitalized’’ for purposes of— (1) section 216 of the Federal Credit Union Act; and (2) sections 29, 38, 44, and 46 of the Federal Deposit Insurance Act. (c) TREATMENT OF CERTAIN RISK-WEIGHTED ASSET REQUIREMENTS FOR QUALIFYING BANKING ORGANIZATIONS.— (1) ACQUISITION SIZE CRITERIA TREATMENT.—A qualifying banking organization shall be deemed to meet the criteria described under section 4(j)(4)(D) of the Bank Holding Company Act of 1956, so long as after the proposed transaction the acquiring qualifying banking organization would maintain a quarterly leverage ratio of at least 10 percent. (2) USE OF LEVERAGE EXPOSURE.—With respect to a qualifying banking organization, in determining whether a proposal qualifies with the criteria described under subparagraphs (A)(iii) and (B)(i) of section 4(j)(4) of the Bank Holding Company Act of 1956, the Board of Governors of the Federal Reserve System shall consider the leverage exposure of an insured depository institution instead of the total risk-weighted assets of such institution. SEC. 603. CONTINGENT CAPITAL STUDY. (a) STUDY.—The Board of Governors of the
Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency shall each carry out a study, which shall include holding public hearings, on how to design a requirement that banking organizations issue contingent capital with a market-based conversion trigger. (b) REPORT.—Not later than the end of the 1year period beginning on the date of the enactment of this Act, each agency described under subsection (a) shall submit a report to the Congress containing—
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(1) all findings and determinations made by the agency in carrying out the study required under subsection (a); and (2) the agency’s recommendations on how the Congress should design a requirement that banking organizations issue contingent capital with a market-based conversion trigger. SEC. 604. STUDY ON ALTERING THE CURRENT PROMPT CORRECTIVE ACTION RULES. (a) STUDY.—The Comptroller General of the
United States shall conduct a study to assess the benefits and feasibility of altering the current prompt corrective action rules and replacing the Basel-based capital ratios with the nonperforming asset coverage ratio or NACR as the trigger for specific required supervisory interventions. The Comptroller General shall ensure that such study includes the following: (1) An assessment of the performance of an NACR forward-looking measure of a banking organization’s solvency condition relative to the regulatory capital ratios currently used by prompt corrective action rules. (2) An analysis of the performance of alternative definitions of nonperforming assets. (3) An assessment of the impact of two alternative intervention thresholds: (A) An initial (high) intervention threshold, below which appropriate Federal banking agency examiners are required to intervene and assess a banking organization’s condition and prescribe remedial measures. (B) A lower threshold, below which banking organizations must increase their capital, seek an acquirer, or face mandatory resolution within 90 days. (b) REPORT.—Not later than the end of the 1year period beginning on the date of the enactment of this Act, the Comptroller General shall submit a report to the Congress containing— (1) all findings and determinations made in carrying out the study required under subsection (a); and (2) recommendations on the most suitable definition of nonperforming assets, as well as the two numerical thresholds that trigger specific required supervisory interventions. SEC. 605. DEFINITIONS.
For purposes of this title: (1) APPROPRIATE FEDERAL BANKING AGENCY.— The term ‘‘appropriate Federal banking agency’’— (A) has the meaning given such term under section 3 of the Federal Deposit Insurance Act; and (B) means the National Credit Union Administration, in the case of an insured credit union. (2) BANKING ORGANIZATION.—The term ‘‘banking organization’’ means— (A) an insured depository institution; (B) an insured credit union; (C) a depository institution holding company; (D) a company that is treated as a bank holding company for purposes of section 8 of the International Banking Act; and (E) a U.S. intermediate holding company established by a foreign banking organization pursuant to section 252.153 of title 12, Code of Federal Regulations. (3) FOREIGN EXCHANGE SWAP .—The term ‘‘foreign exchange swap’’ has the meaning given that term under section 1a of the Commodity Exchange Act. (4) INSURED CREDIT UNION.—The term ‘‘insured credit union’’ has the meaning given that term under section 101 of the Federal Credit Union Act. (5) LEVERAGE EXPOSURE.—The term ‘‘leverage exposure’’— (A) with respect to a banking organization other than an insured credit union or a traditional banking organization, has the meaning given the term ‘‘total leverage exposure’’ under section 3.10(c)(4)(ii), 217.10(c)(4), or 324.10(c)(4) of title 12, Code of Federal Regulations, as applicable, as in effect on the date of the enactment of this Act;
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