Sec. 3. Equity capital requirements

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Not later than 1 year after the date of enactment of this Act, the appropriate Federal banking agency, in consultation with the other Federal banking agencies, shall, by rule, establish capital requirements for the ratio of equity capital to total consolidated assets for all financial institutions. In no case may the requirements issued under this subsection require any financial institution with more than $50,000,000,000 in total consolidated assets to have a ratio of less than 8 percent of equity capital to total consolidated assets.

The equity capital requirement issued under this subsection for any financial institution with $50,000,000,000 or less in total consolidated assets shall be comparable to the requirements established by the appropriate Federal banking agencies under the prompt corrective actions regulations implementing section 38 of the Federal Deposit Insurance Act ( 12 U.S.C. 1831o ) and under the capital adequacy regulations implementing section 5 of the Bank Holding Company Act of 1956 ( 12 U.S.C. 1844 ), that were in effect as of May 1, 2013.

The Corporation shall study historical equity capital ratios chosen by large depository institutions before the advent of the Federal Reserve System, Federal deposit insurance, and the Federal income tax encouraged depositories to favor more highly leveraged deposit and debt funding. Not later than 90 days after the date of enactment of this Act, the Corporation shall issue a report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives regarding the study conducted under clause (i).

The Corporation, in consultation with the other Federal banking agencies, shall structure the capital surcharge for financial institutions with at least $500,000,000,000 in total consolidated assets, such that the surcharge fully accounts for and offsets any distortion of capital levels by the Government policies described in clause (i). Not later than 1 year after the date of completion of the study required by subparagraph (A), the appropriate Federal banking agency, in consultation with the other Federal banking agencies, shall, by rule, establish equity capital surcharges for each financial institution having at least $500,000,000,000 in total consolidated assets.

Capital requirements established under this paragraph may increase continuously as a percentage of total consolidated assets as the total consolidated assets of a financial institution increase. The surcharge imposed under the rules issued under this paragraph shall require any financial institution having at least $500,000,000,000 in total consolidated assets to have a ratio of not less than 15 percent of equity capital to total consolidated assets. Any attempt by a financial institution to structure any activity, transaction, or affiliation for the purpose or effect of evading or attempting to evade the asset threshold that gives rise to the surcharge provided in subparagraph

(A)shall be considered a violation of the Federal Deposit Insurance Act, section 24 of the Revised Statutes of the United States, and the Bank Holding Company Act of 1956, as applicable to such financial institution. Notwithstanding any other provision of law, if the Board, the Corporation, or the Comptroller of the Currency has reasonable cause to believe that a financial institution or any affiliate thereof has engaged in an activity, transaction, or affiliation in a manner that functions as an evasion of the asset threshold that gives rise to the surcharge provided in subparagraph

(A)or otherwise violates such provision, the appropriate Federal banking agency shall order, after due notice and opportunity for hearing, the financial institution to restrict, restructure, or divest the offending activities, transactions, or investments. The equity capital and surcharge rules issued under paragraphs

(1)and

(2)shall apply with respect to each financial institution not later than 5 years after the date on which final rules are published in the Federal Register with respect to that financial institution. Any financial institution that meets the equity capital requirements established under paragraph

(1)or surcharge requirements established under paragraph

(2)shall be considered well capitalized for purposes of— section 38 of the Federal Deposit Insurance Act ( 12 U.S.C. 1831o ); and the early remediation requirements established pursuant to section 166 of the Dodd-Frank Wall Street Reform and Consumer Protection Act ( 12 U.S.C. 5366 ). Consistent with this section, the appropriate Federal banking agency, in consultation with the other Federal banking agencies, shall, by regulation, establish the appropriate capital categories for financial institutions under section 38 of the Federal Deposit Insurance Act (12 U.S.C. 1831o) and early remediation requirements established pursuant to section 166 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. 5366). The equity capital and surcharge rules issued under paragraphs

(1)and

(2)shall be considered sufficient to satisfy the risk-based capital requirements and leverage limits for purposes of section 165 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. 5365). Not later than 1 year after the date of enactment of this Act, notwithstanding any other provision of law applicable to insured depository institutions, the Board (subject to section 5(c)(3) of the Bank Holding Company Act of 1956 ( 12 U.S.C. 1844(c)(3) ) and section 10(g) of the Home Owners' Loan Act ( 12 U.S.C. 1467a(g) )), the Corporation, and the Comptroller of the Currency shall each promulgate regulations to establish capital requirements for each affiliate and subsidiary of a financial institution that are no less stringent than the equity capital requirements established under subsection (a)(1) or surcharge requirements established under subsection (a)(2). Paragraph

(1)and the regulations issued under paragraph

(1)do not apply in the case of any financial institution with less than $50,000,000,000 in total consolidated assets. Section 5(c)(5)(B) of the Bank Holding Company Act of 1956 ( 12 U.S.C. 1844(c)(5)(B) ) is amended— by striking clauses

(i)and (v); in clause (iv), by striking ; or and inserting a period; in clause (iii), by inserting or after the semicolon; and by redesignating clauses

(ii)through

(iv)as clauses

(i)through (iii), respectively. The Home Owner's Loan Act (15 U.S.C. 1461 et seq.) is amended— in section 2 (12 U.S.C. 1462) by adding at the end the following: The term functionally regulated affiliate means, with respect to a savings association, any affiliate of such savings association that is a company described in section 5(c)(5)(B) of the Bank Holding Company Act of 1956 (12 U.S.C. 1844(c)(5)(B)). ; and in section 10(g) ( 12 U.S.C. 1467a(g) ) by adding at the end the following: Notwithstanding section 3(b)(1) of the Terminating Bailouts for Taxpayer Fairness Act of 2013, the Board may not, by regulation, guideline, order, or otherwise, prescribe or impose any capital or capital adequacy rules, guidelines, standards, or requirements on any functionally regulated subsidiary of a savings and loan holding company or functionally regulated affiliate of a savings association that— is not a depository institution; and is— in compliance with the applicable capital requirements of its Federal regulatory authority (including the Securities and Exchange Commission) or State insurance authority; properly registered as an investment adviser under the Investment Advisers Act of 1940, or with any State; or licensed as an insurance agent with the appropriate State insurance authority. . For purposes of calculating— equity capital requirements under this section, equity capital shall consist of tangible common equity (defined as common stockholders’ equity less goodwill), deferred tax assets, accumulated other comprehensive income, treasury stock, and intangible assets plus retained earnings; and total consolidated assets under this section, derivative exposures shall include— the fair value of the derivative exposures without recognizing the benefits of any netting arrangement, unless— the netting arrangement is documented under a formal master netting agreement or other formal arrangement with a derivatives clearing organization; and the financial institution, as a matter of ongoing business practice, exchanges collateral on a daily basis for the fulfillment of variation margin requirements on a net basis, and fulfills all contractual payment requirements, including payments for contract termination, on a net basis, with such net exchange of collateral and payments encompassing all derivative exposures covered by the formal arrangement; and off-balance sheet assets— defined as any assets in which the financial institution has guaranteed performance by another party or provided a liquidity backstop should another party be unable to perform under the contractual obligation; and excluding commitments to lend, whereby certain provisions and or covenants exist that limit the risk to the bank holding company with respect to future draws of liquidity. Except as provided in paragraph (2), nothing in this section shall be interpreted to prevent any appropriate Federal banking agency from establishing supplemental risk-based capital requirements for any financial institution with more than $20,000,000,000 in total consolidated assets, or any affiliate or subsidiary of such institutions for the purpose of measuring the relative risk of certain assets and preventing investment in excessive amounts of riskier assets. An appropriate Federal banking agency may not implement risk-based capital requirements with respect to a financial institution with more than $20,000,000,000, unless all appropriate Federal banking agencies agree that bank supervision is insufficient to prevent the excessive concentration of riskier assets. Before proposing risk based capital rules described in this subsection, the appropriate Federal banking agencies shall submit a joint report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives detailing the deficiency in supervisory tools in preventing investment in excessive amounts of riskier assets and how risk based capital will be used. The appropriate Federal banking agencies may establish supplemental risk-based capital requirements that do not replace the equity capital requirements required by this Act not earlier than 90 days after the date of submission of the report under this subparagraph. The Board, the Corporation, and the Comptroller of the Currency shall be prohibited from any further implementation of any rules of the Federal banking agencies regarding Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems .

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Sec. 3

Equity capital requirements

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