Section 1 Short title
This Act may be cited as the “Depositor Protection Act of 2023”.
Depositor Protection Act of 2023
A BILL
To amend the Federal Deposit Insurance Act to address transaction account guarantees, and for other purposes.
Sec. 2 Transaction account guarantees
In general— Section 11(a)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1821(a)(1)) is amended—
in subparagraph (B)—
by striking “The net amount” and inserting the following:
“(i) In general—Subject to clause (ii), the net amount”
by adding at the end the following:
“(ii) Insurance for noninterest-bearing transaction accounts
“(I) In general—Notwithstanding clause (i), and subject to subclause (II) of this clause, the Corporation shall insure the net amount, in an amount that is not more than $100,000,000, that any depositor at an insured depository institution maintains in a noninterest-bearing transaction account. Such amount shall not be taken into account when computing the net amount due to such depositor under clause (i).
“(II) Ability of certain insured depository institutions to opt-out
“(aa) In general—An insured depository institution that has less than $250,000,000,000 in total consolidated assets may elect not to participate with respect to the increased amount of insurance made available under subclause (I).
“(bb) Limitation on assessment of fee—The Corporation may not assess a fee on any insured depository institution that elects not to participate with respect to the increased amount of insurance made available under subclause (I).
“(III) Definition—In this clause, the term noninterest-bearing transaction account means a deposit or account maintained at an insured depository institution—
“(aa) with respect to which interest is neither accrued nor paid;
“(bb) on which the depositor or account holder is permitted to make withdrawals by negotiable or transferable instrument, payment orders of withdrawal, telephone or other electronic media transfers, or other similar items for the purpose of making payments or transfers to third parties or others; and
“(cc) on which the insured depository institution does not reserve the right to require advance notice of an intended withdrawal.”
in subparagraph (C), by striking “subparagraph (B)” and inserting “subparagraph (B)(i)”.
Reversion— On the date that is 2 years after the date of enactment of this Act, section 11(a)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1821(a)(1)) is amended—
by amending subparagraph (B) to read as follows:
“(B) Net amount of insured deposit—The net amount to any depositor at an insured depository institution shall not exceed the standard maximum deposit insurance amount as determined in accordance with subparagraphs (C), (D), (E), and (F) and paragraph (3).”
in subparagraph (C), by striking “subparagraph (B)(i)” and inserting “subparagraph (B)”.
Sec. 3 Reciprocal deposits
Section 29(i)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1831f(i)(1)) is amended—
in subparagraph (A), by striking “$5,000,000,000” and inserting “$10,000,000,000”; and
in subparagraph (B), by striking “20 percent” and inserting “25 percent”.
Sec. 4 Adjusted least cost resolution
Section 13(c)(4) of the Federal Deposit Insurance Act (12 U.S.C. 1823(c)(4)) is amended—
by redesignating subparagraph (H) as subparagraph (I); and
by inserting after subparagraph (G) the following:
“(H) Non-systemic secondary cost to the Deposit Insurance Fund
“(i) Definitions—In this subparagraph:
“(I) Large insured depository institution—The term large insured depository institution means an insured depository institution with total consolidated assets of not less than $100,000,000,000.
“(II) Non-systemic secondary cost to the Deposit Insurance Fund—The term non-systemic secondary cost to the Deposit Insurance Fund means a cost to the Deposit Insurance Fund from—
“(aa) the appointment of the Corporation as a receiver for a second or additional insured depository institution as a direct and contemporaneous result of the compliance by the Corporation with subparagraphs (A) and (E) with respect to a large insured depository institution, including the cost of liquidating any such second or additional insured depository institution in compliance with subparagraphs (A) and (E);
“(bb) a reduction in the price of an asset as a direct and contemporaneous result of the liquidation by the Corporation of a large insured depository institution in compliance with subparagraphs (A) and (E); or
“(cc) any other direct and contemporaneous result of the compliance by the Corporation with subparagraphs (A) and (E) with respect to a large insured depository institution (other than any such loss that arises from serious adverse effects on economic conditions or financial stability within the meaning of subparagraph (G)).
“(ii) Action permitted upon determination by the board of directors
“(I) In general—Notwithstanding subparagraphs (A) and (E), if the Board of Directors (upon a vote of not less than two-thirds of the members of the Board of Directors) makes a determination described in subclause (II), the Corporation may take action or assistance under paragraph (2) for the purpose of facilitating—
“(aa) a merger or consolidation of the applicable large insured depository institution with another insured depository institution;
“(bb) the sale of any or all of the assets of the applicable large insured depository institution;
“(cc) the assumption of any or all of the liabilities of the applicable large insured depository institution by another insured depository institution; or
“(dd) the acquisition of the stock of the applicable large insured depository institution.
“(II) Determination described—A determination described in this subclause is a determination that—
“(aa) the compliance by the Corporation with subparagraphs (A) and (E) with respect to a large insured depository institution for which the Corporation has been appointed receiver would result in a non-systemic secondary cost to the Deposit Insurance Fund; and
“(bb) any action or assistance under this subparagraph would avoid or mitigate the non-systemic secondary cost to the Deposit Insurance Fund described in item (aa).
“(iii) Adjusted least-cost resolution requirement—The Corporation may not take any action or provide any assistance under this subparagraph unless the total amount of the expenditures by the Corporation and obligations incurred by the Corporation (including any immediate and long-term obligation of the Corporation and any direct or contingent liability for future payment by the Corporation) in connection with the taking of that action or provision of that assistance with respect to an insured depository institution is the least costly to the Deposit Insurance Fund, taking into account the non-systemic secondary costs to the Deposit Insurance Fund that would result without the taking of that action or the provision of that assistance, of all possible methods for meeting the obligations of the Corporation under this section.
“(iv) Documentation required—The Chairperson of the Board of Directors shall—
“(I) document any determination under clause (ii); and
“(II) retain the documentation for review under clause (v).
“(v) GAO review—The Comptroller General of the United States shall review and report to Congress on any determination under clause (ii), including—
“(I) the basis for the determination;
“(II) the purpose for which any action was taken pursuant to such clause; and
“(III) the likely effect of the determination and such action on the incentives and conduct of insured depository institutions and uninsured depositors.
“(vi) Notice
“(I) In general—Not later than 3 days after making a determination under clause (ii), the Secretary of the Treasury shall provide written notice of any determination under clause (ii) to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives.
“(II) Description of basis of determination—The notice under subclause (I) shall include a description of the basis for any determination under clause (ii).”
Sec. 5 Acquisitions of distressed banks
Definitions— In this section:
Appropriate Federal banking agency; insured bank— The terms appropriate Federal banking agency and insured bank have the meanings given the terms in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813).
Board— The term Board means the Board of Governors of the Federal Reserve System.
Bank holding company; control; subsidiary— The terms bank holding company, control, and subsidiary have the meanings given the terms in section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 1841).
Covered entity— The term covered entity means—
after a transaction described in subsection (b)(1)(A), the bank holding company of which the applicable distressed insured bank has become a subsidiary;
after a transaction described in subsection (b)(1)(B), the bank holding company that has acquired the direct or indirect ownership or control described in that provision; and
after a merger or consolidation described in subsection (b)(1)(C), the bank holding company that results because of that merger or consolidation.
Distressed insured bank— The term distressed insured bank means an insured bank that has a class of equity securities, or is controlled, directly or indirectly, by a company that has a class of equity securities—
registered pursuant to section 12(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78l(b)); and
the price of which on a national securities exchange has declined not less than 20 percent at any time on or after March 1, 2023, as compared with the highest price of those securities on that exchange on or after March 1, 2023.
Equity security; exchange— The terms equity security and exchange have the meanings given the terms in section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)).
National securities exchange— The term national securities exchange means an exchange that is registered in accordance with section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f).
Total consolidated assets— The term total consolidated assets means, with respect to an entity, the total consolidated assets of that entity, as determined pursuant to the instructions of Form FR Y–9C of the Board.
Temporary waiver of regulatory approvals for acquisitions of distressed banks—
In general— Subject to paragraphs (2) and (3), except as provided in paragraph (4), and notwithstanding any requirement or restriction relating to notification, approval, or other matter under section 3 or 4 of the Bank Holding Company Act of 1956 (12 U.S.C. 1842, 1843), section 7(j) or 18(c) of the Federal Deposit Insurance Act (12 U.S.C. 1817(j), 1828(c)), or any other Federal or State law, after written notice to the Board—
a distressed insured bank may become a subsidiary of a bank holding company;
a bank holding company may acquire direct or indirect ownership or control of any voting shares of any distressed insured bank or any company that controls a distressed insured bank; and
a bank holding company may merge or consolidate with a bank holding company that has a subsidiary that is a distressed insured bank.
Conditions— Paragraph (1) shall apply only if—
after the applicable transaction or other action under that paragraph—
the applicable covered entity would meet the required capital levels for well capitalized bank holding companies established by the Board; or
in the case of a transaction or other action described in subparagraph (A) or (B) of that paragraph, the total consolidated assets of the applicable covered entity would be not more than 2 times the amount of the total consolidated assets (as measured immediately before the transaction or other action) of—
in the case of an action described in subparagraph (A) of that paragraph, the bank holding company of which the distressed insured bank is becoming a subsidiary as a result of that action; or
in the case of an acquisition described in subparagraph (B) of that paragraph, the bank holding company that is acquiring direct or indirect ownership or control of any voting shares of the distressed insured bank or the company that controls a distressed insured bank; and
each insured bank controlled by the applicable covered entity—
has a composite rating, as determined by the appropriate Federal banking agency in the most recent report of examination of the applicable insured bank, of 1 or 2 under the Uniform Financial Institution Rating System; and
has been assigned by the appropriate Federal banking agency a rating of “outstanding” or “satisfactory” in the most recent Community Reinvestment Act examination of the applicable insured bank.
Expiration— A transaction or other action to which paragraph (1) applies shall be consummated not later than 90 days after the date of enactment of this Act.
Exceptions— Paragraph (1) shall not apply to—
any action that would cause a distressed insured bank to become a subsidiary of an insured bank;
any acquisition of direct or indirect ownership or control by an insured bank of any voting shares of any distressed insured bank or any company that controls a distressed insured bank; or
any merger, consolidation, acquisition of assets, or other acquisition of control, of another company that would be subject to section 14 of the Bank Holding Company Act of 1956 (12 U.S.C. 1852).
No premerger notification and waiting period— A transaction under subsection (b) shall be exempt from the requirements of section 7A of the Clayton Act (15 U.S.C. 18a).