---
kind: "section"
citation: "12 U.S.C. § 5365"
title: "12"
title_heading: "Banks and Banking"
number: "5365"
heading: "Enhanced supervision and prudential standards for nonbank financial companies supervised by the Board of Governors and certain bank holding companies"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/12/5365"
units:
  - "Chapter 53 — Wall Street Reform and Consumer Protection"
  - "Subchapter I — Financial Stability"
  - "Part C — Additional Board of Governors Authority for Certain Nonbank Financial Companies and Bank Holding Companies"
---

# §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) **Purpose—** In 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](/usc/12/5301.md?p=3) shall, on its own or pursuant to recommendations by the [Council](/usc/12/5301.md?p=8) under [section 5325 of this title](/usc/12/5325.md), establish [prudential standards](/usc/12/5301.md?p=13) for [nonbank financial companies](/usc/12/5311.md?p=a-4-C) supervised by the [Board of Governors](/usc/12/5301.md?p=3) and [bank holding companies](/usc/12/5301.md?p=18-A) 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](/usc/12/5311.md?p=a-4-C) and [bank holding companies](/usc/12/5301.md?p=18-A) 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)](#b-3).
  - (2) **Tailored application—**
    - (A) **In general—** In prescribing more stringent [prudential standards](/usc/12/5301.md?p=13) under this section, the [Board of Governors](/usc/12/5301.md?p=3) shall, on its own or pursuant to a recommendation by the [Council](/usc/12/5301.md?p=8) in accordance with [section 5325 of this title](/usc/12/5325.md), differentiate among [companies](/usc/12/5381.md?p=a-5) on an individual basis or by category, taking into consideration their capital structure, riskiness, complexity, financial activities ([including](/usc/12/5301.md?p=18-A) the financial activities of their [subsidiaries](/usc/12/5301.md?p=18-A)), size, and any other risk-related factors that the [Board of Governors](/usc/12/5301.md?p=3) deems appropriate.
    - (B) **Adjustment of threshold for application of certain standards—** The [Board of Governors](/usc/12/5301.md?p=3) may, pursuant to a recommendation by the [Council](/usc/12/5301.md?p=8) in accordance with [section 5325 of this title](/usc/12/5325.md), establish an asset threshold above the applicable threshold for the application of any standard established under subsections [(c)](#c) through [(g)](#g).
    - (C) **Risks to financial stability and safety and soundness—** The [Board of Governors](/usc/12/5301.md?p=3) may by order or rule promulgated pursuant to [section 553 of title 5](/usc/5/553.md) apply any prudential standard established under this section to any [bank holding company](/usc/12/5301.md?p=18-A) or [bank holding companies](/usc/12/5301.md?p=18-A) 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](/usc/12/5301.md?p=3)—
      - (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)](#a-1); or
        - (II) to promote the safety and soundness of the [bank holding company](/usc/12/5301.md?p=18-A) or [bank holding companies](/usc/12/5301.md?p=18-A); and
      - (ii) takes into consideration the [bank holding company](/usc/12/5301.md?p=18-A)’s or [bank holding companies](/usc/12/5301.md?p=18-A)’ capital structure, riskiness, complexity, financial activities ([including](/usc/12/5301.md?p=18-A) financial activities of [subsidiaries](/usc/12/5301.md?p=18-A)), size, and any other risk-related factors that the [Board of Governors](/usc/12/5301.md?p=3) deems appropriate.
- (b) **Development of prudential standards—**
  - (1) **In general—**
    - (A) **Required standards—** The [Board of Governors](/usc/12/5301.md?p=3) shall establish [prudential standards](/usc/12/5301.md?p=13) for [nonbank financial companies](/usc/12/5311.md?p=a-4-C) supervised by the [Board of Governors](/usc/12/5301.md?p=3) and [bank holding companies](/usc/12/5301.md?p=18-A) described in [subsection (a)](#a), that shall include—
      - (i) risk-based capital requirements and leverage limits, unless the [Board of Governors](/usc/12/5301.md?p=3), in consultation with the [Council](/usc/12/5301.md?p=8), determines that such requirements are not appropriate for a [company](/usc/12/5381.md?p=a-5) subject to more stringent [prudential standards](/usc/12/5301.md?p=13) because of the activities of such [company](/usc/12/5381.md?p=a-5) (such as [investment company](/usc/12/5301.md?p=15-C) activities or assets under management) or structure, in which case, the [Board of Governors](/usc/12/5301.md?p=3) shall apply other standards that result in similarly stringent risk [controls](/usc/12/5301.md?p=18-A);
      - (ii) liquidity requirements;
      - (iii) overall risk management requirements;
      - (iv) resolution plan requirements; and
      - (v) concentration limits.
    - (B) **Additional standards authorized—** The [Board of Governors](/usc/12/5301.md?p=3) may establish additional [prudential standards](/usc/12/5301.md?p=13) for [nonbank financial companies](/usc/12/5311.md?p=a-4-C) supervised by the [Board of Governors](/usc/12/5301.md?p=3) and [bank holding companies](/usc/12/5301.md?p=18-A) described in [subsection (a)](#a), that include—
      - (i) a contingent capital requirement;
      - (ii) enhanced public disclosures, [including](/usc/12/5301.md?p=18-A) [credit](/usc/12/5481.md?p=7) exposure reports;
      - (iii) short-term debt limits; and
      - (iv) such other [prudential standards](/usc/12/5301.md?p=13) as the [Board](/usc/12/1861.md?p=b-3) or Governors, on its own or pursuant to a recommendation made by the [Council](/usc/12/5301.md?p=8) in accordance with [section 5325 of this title](/usc/12/5325.md), determines are appropriate.
  - (2) **Standards for foreign financial companies—** In applying the standards set forth in [paragraph (1)](#b-1) to any [foreign nonbank financial company](/usc/12/5311.md?p=a-4-A) supervised by the [Board of Governors](/usc/12/5301.md?p=3) or foreign-based [bank holding company](/usc/12/5301.md?p=18-A), the [Board of Governors](/usc/12/5301.md?p=3) 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](/usc/12/5341.md?p=2) is subject on a consolidated basis to home country standards that are comparable to those applied to [financial companies](/usc/12/5341.md?p=2) in the United States.
  - (3) **Considerations—** In prescribing [prudential standards](/usc/12/5301.md?p=13) under [paragraph (1)](#b-1), the [Board of Governors](/usc/12/5301.md?p=3) shall—
    - (A) take into account differences among [nonbank financial companies](/usc/12/5311.md?p=a-4-C) supervised by the [Board of Governors](/usc/12/5301.md?p=3) and [bank holding companies](/usc/12/5301.md?p=18-A) described in [subsection (a)](#a), based on—
      - (i) the factors described in subsections (a) and (b) of [section 5323 of this title](/usc/12/5323.md);
      - (ii) whether the [company](/usc/12/5381.md?p=a-5) owns an [insured depository institution](/usc/12/5301.md?p=18-A);
      - (iii) nonfinancial activities and affiliations of the [company](/usc/12/5381.md?p=a-5); and
      - (iv) any other risk-related factors that the [Board of Governors](/usc/12/5301.md?p=3) 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](/usc/12/5323.md) would not result in sharp, discontinuous changes in the [prudential standards](/usc/12/5301.md?p=13) established under paragraph (1) of this subsection;
    - (C) take into account any recommendations of the [Council](/usc/12/5301.md?p=8) under [section 5325 of this title](/usc/12/5325.md); and
    - (D) adapt the required standards as appropriate in light of any predominant line of business of such [company](/usc/12/5381.md?p=a-5), [including](/usc/12/5301.md?p=18-A) assets under management or other activities for which particular standards may not be appropriate.
  - (4) **Consultation—** Before imposing [prudential standards](/usc/12/5301.md?p=13) or any other requirements pursuant to this section, [including](/usc/12/5301.md?p=18-A) notices of deficiencies in resolution plans and more stringent requirements or divestiture orders resulting from such notices, that are likely to have a significant impact on a [functionally regulated subsidiary](/usc/12/5301.md?p=11) or [depository institution](/usc/12/5301.md?p=18-A) [subsidiary](/usc/12/5301.md?p=18-A) of a [nonbank financial company supervised by the Board of Governors](/usc/12/5311.md?p=a-4-D) or a [bank holding company](/usc/12/5301.md?p=18-A) described in [subsection (a)](#a), the [Board of Governors](/usc/12/5301.md?p=3) shall consult with each [Council](/usc/12/5301.md?p=8) member that primarily supervises any such [subsidiary](/usc/12/5301.md?p=18-A) with respect to any such standard or requirement.
  - (5) **Report—** The [Board of Governors](/usc/12/5301.md?p=3) shall submit an annual report to Congress regarding the implementation of the [prudential standards](/usc/12/5301.md?p=13) required pursuant to [paragraph (1)](#b-1), [including](/usc/12/5301.md?p=18-A) the use of such standards to mitigate risks to the financial stability of the United States.
- (c) **Contingent capital—**
  - (1) **In general—** Subsequent to submission by the [Council](/usc/12/5301.md?p=8) of a report to Congress under [section 5325(c) of this title](/usc/12/5325.md?p=c), the [Board of Governors](/usc/12/5301.md?p=3) may issue regulations that require each [nonbank financial company supervised by the Board of Governors](/usc/12/5311.md?p=a-4-D) and [bank holding companies](/usc/12/5301.md?p=18-A) described in [subsection (a)](#a) to maintain a minimum amount of contingent capital that is convertible to equity in times of financial stress.
  - (2) **Factors to consider—** In issuing regulations under this subsection, the [Board of Governors](/usc/12/5301.md?p=3) shall consider—
    - (A) the results of the study undertaken by the [Council](/usc/12/5301.md?p=8), and any recommendations of the [Council](/usc/12/5301.md?p=8), under [section 5325(c) of this title](/usc/12/5325.md?p=c);
    - (B) an appropriate transition period for implementation of contingent capital under this subsection;
    - (C) the factors described in [subsection (b)(3)(A)](#b-3-A);
    - (D) capital requirements applicable to the [nonbank financial company supervised by the Board of Governors](/usc/12/5311.md?p=a-4-D) or a [bank holding company](/usc/12/5301.md?p=18-A) described in [subsection (a)](#a), and [subsidiaries](/usc/12/5301.md?p=18-A) thereof; and
    - (E) any other factor that the [Board of Governors](/usc/12/5301.md?p=3) deems appropriate.
- (d) **Resolution plan and credit exposure reports—**
  - (1) **Resolution plan—** The [Board of Governors](/usc/12/5301.md?p=3) shall require each [nonbank financial company supervised by the Board of Governors](/usc/12/5311.md?p=a-4-D) and [bank holding companies](/usc/12/5301.md?p=18-A) described in [subsection (a)](#a) to report periodically to the [Board of Governors](/usc/12/5301.md?p=3), the [Council](/usc/12/5301.md?p=8), and the [Corporation](/usc/12/5301.md?p=7) the plan of such [company](/usc/12/5381.md?p=a-5) 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](/usc/12/5301.md?p=18-A) affiliated with the [company](/usc/12/5381.md?p=a-5) is adequately protected from risks arising from the activities of any nonbank [subsidiaries](/usc/12/5301.md?p=18-A) of the [company](/usc/12/5381.md?p=a-5);
    - (B) full descriptions of the ownership structure, assets, liabilities, and contractual obligations of the [company](/usc/12/5381.md?p=a-5);
    - (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](/usc/12/5381.md?p=a-5) is pledged; and
    - (D) any other information that the [Board of Governors](/usc/12/5301.md?p=3) and the [Corporation](/usc/12/5301.md?p=7) jointly require by rule or order.
  - (2) **Credit exposure report—** The [Board of Governors](/usc/12/5301.md?p=3) may require each [nonbank financial company supervised by the Board of Governors](/usc/12/5311.md?p=a-4-D) and [bank holding companies](/usc/12/5301.md?p=18-A) described in [subsection (a)](#a) to report periodically to the [Board of Governors](/usc/12/5301.md?p=3), the [Council](/usc/12/5301.md?p=8), and the [Corporation](/usc/12/5301.md?p=7) on—
    - (A) the nature and extent to which the [company](/usc/12/5381.md?p=a-5) has [credit](/usc/12/5481.md?p=7) exposure to other [significant nonbank financial companies](/usc/12/5311.md?p=a-7) and [significant bank holding companies](/usc/12/5311.md?p=a-7); and
    - (B) the nature and extent to which other [significant nonbank financial companies](/usc/12/5311.md?p=a-7) and [significant bank holding companies](/usc/12/5311.md?p=a-7) have [credit](/usc/12/5481.md?p=7) exposure to that [company](/usc/12/5381.md?p=a-5).
  - (3) **Review—** The [Board of Governors](/usc/12/5301.md?p=3) and the [Corporation](/usc/12/5301.md?p=7) shall review the information provided in accordance with this subsection by each [nonbank financial company supervised by the Board of Governors](/usc/12/5311.md?p=a-4-D) and [bank holding company](/usc/12/5301.md?p=18-A) described in [subsection (a)](#a).
  - (4) **Notice of deficiencies—** If the [Board of Governors](/usc/12/5301.md?p=3) and the [Corporation](/usc/12/5301.md?p=7) jointly determine, based on their review under [paragraph (3)](#d-3), that the resolution plan of a [nonbank financial company supervised by the Board of Governors](/usc/12/5311.md?p=a-4-D) or a [bank holding company](/usc/12/5301.md?p=18-A) described in [subsection (a)](#a) is not credible or would not facilitate an orderly resolution of the [company](/usc/12/5381.md?p=a-5) under [title 11](/usc/11.md)—
    - (A) the [Board of Governors](/usc/12/5301.md?p=3) and the [Corporation](/usc/12/5301.md?p=7) shall notify the [company](/usc/12/5381.md?p=a-5) of the deficiencies in the resolution plan; and
    - (B) the [company](/usc/12/5381.md?p=a-5) shall resubmit the resolution plan within a timeframe determined by the [Board of Governors](/usc/12/5301.md?p=3) and the [Corporation](/usc/12/5301.md?p=7), with revisions demonstrating that the plan is credible and would result in an orderly resolution under [title 11](/usc/11.md), [including](/usc/12/5301.md?p=18-A) any proposed changes in business operations and corporate structure to facilitate implementation of the plan.
  - (5) **Failure to resubmit credible plan—**
    - (A) **In general—** If a [nonbank financial company supervised by the Board of Governors](/usc/12/5311.md?p=a-4-D) or a [bank holding company](/usc/12/5301.md?p=18-A) described in [subsection (a)](#a) fails to timely resubmit the resolution plan as required under [paragraph (4)](#d-4), with such revisions as are required under [subparagraph (B)](#d-5-B), the [Board of Governors](/usc/12/5301.md?p=3) and the [Corporation](/usc/12/5301.md?p=7) may jointly impose more stringent capital, leverage, or liquidity requirements, or restrictions on the growth, activities, or operations of the [company](/usc/12/5381.md?p=a-5), or any [subsidiary](/usc/12/5301.md?p=18-A) thereof, until such time as the [company](/usc/12/5381.md?p=a-5) resubmits a plan that remedies the deficiencies.
    - (B) **Divestiture—** The [Board of Governors](/usc/12/5301.md?p=3) and the [Corporation](/usc/12/5301.md?p=7), in consultation with the [Council](/usc/12/5301.md?p=8), may jointly direct a [nonbank financial company supervised by the Board of Governors](/usc/12/5311.md?p=a-4-D) or a [bank holding company](/usc/12/5301.md?p=18-A) described in [subsection (a)](#a), by order, to divest certain assets or operations identified by the [Board of Governors](/usc/12/5301.md?p=3) and the [Corporation](/usc/12/5301.md?p=7), to facilitate an orderly resolution of such [company](/usc/12/5381.md?p=a-5) under [title 11](/usc/11.md), in the event of the failure of such [company](/usc/12/5381.md?p=a-5), in any case in which—
      - (i) the [Board of Governors](/usc/12/5301.md?p=3) and the [Corporation](/usc/12/5301.md?p=7) have jointly imposed more stringent requirements on the [company](/usc/12/5381.md?p=a-5) pursuant to [subparagraph (A)](#d-5-A); and
      - (ii) the [company](/usc/12/5381.md?p=a-5) has failed, within the 2-year period beginning on the date of the imposition of such requirements under [subparagraph (A)](#d-5-A), to resubmit the resolution plan with such revisions as were required under [paragraph (4)(B)](#d-4-B).
  - (6) **No limiting effect—** A resolution plan submitted in accordance with this subsection shall not be binding on a bankruptcy [court](/usc/12/5381.md?p=a-6), a receiver appointed under subchapter II, or any other authority that is authorized or required to resolve the [nonbank financial company](/usc/12/5311.md?p=a-4-C) supervised by the [Board](/usc/12/1861.md?p=b-3), any [bank holding company](/usc/12/5301.md?p=18-A), or any [subsidiary](/usc/12/5301.md?p=18-A) or [affiliate](/usc/12/5301.md?p=1) of the foregoing.
  - (7) **No private right of action—** No private right of action may be based on any resolution plan submitted in accordance with this subsection.
  - (8) **Rules—** Not later than 18 months after July 21, 2010, the [Board of Governors](/usc/12/5301.md?p=3) and the [Corporation](/usc/12/5301.md?p=7) shall jointly issue final rules implementing this subsection.
- (e) **Concentration limits—**
  - (1) **Standards—** In order to limit the risks that the failure of any individual [company](/usc/12/5381.md?p=a-5) could pose to a [nonbank financial company supervised by the Board of Governors](/usc/12/5311.md?p=a-4-D) or a [bank holding company](/usc/12/5301.md?p=18-A) described in [subsection (a)](#a), the [Board of Governors](/usc/12/5301.md?p=3), by regulation, shall prescribe standards that limit such risks.
  - (2) **Limitation on credit exposure—** The regulations prescribed by the [Board of Governors](/usc/12/5301.md?p=3) under [paragraph (1)](#e-1) shall prohibit each [nonbank financial company supervised by the Board of Governors](/usc/12/5311.md?p=a-4-D) and [bank holding company](/usc/12/5301.md?p=18-A) described in [subsection (a)](#a) from having [credit](/usc/12/5481.md?p=7) exposure to any unaffiliated [company](/usc/12/5381.md?p=a-5) that exceeds 25 percent of the capital stock and surplus (or such lower amount as the [Board of Governors](/usc/12/5301.md?p=3) may determine by regulation to be necessary to mitigate risks to the financial stability of the United States) of the [company](/usc/12/5381.md?p=a-5).
  - (3) **Credit exposure—** For purposes of [paragraph (2)](#e-2), “[credit](/usc/12/5481.md?p=7) exposure” to a [company](/usc/12/5381.md?p=a-5) means—
    - (A) all extensions of [credit](/usc/12/5481.md?p=7) to the [company](/usc/12/5381.md?p=a-5), [including](/usc/12/5301.md?p=18-A) loans, [deposits](/usc/12/5301.md?p=18-A), and lines of [credit](/usc/12/5481.md?p=7);
    - (B) all repurchase agreements and reverse repurchase agreements with the [company](/usc/12/5381.md?p=a-5), and all securities borrowing and lending transactions with the [company](/usc/12/5381.md?p=a-5), to the extent that such transactions create [credit](/usc/12/5481.md?p=7) exposure for the [nonbank financial company supervised by the Board of Governors](/usc/12/5311.md?p=a-4-D) or a [bank holding company](/usc/12/5301.md?p=18-A) described in [subsection (a)](#a);
    - (C) all guarantees, acceptances, or letters of [credit](/usc/12/5481.md?p=7) ([including](/usc/12/5301.md?p=18-A) endorsement or standby letters of [credit](/usc/12/5481.md?p=7)) issued on behalf of the [company](/usc/12/5381.md?p=a-5);
    - (D) all purchases of or investment in securities issued by the [company](/usc/12/5381.md?p=a-5);
    - (E) counterparty [credit](/usc/12/5481.md?p=7) exposure to the [company](/usc/12/5381.md?p=a-5) in connection with a derivative transaction between the [nonbank financial company supervised by the Board of Governors](/usc/12/5311.md?p=a-4-D) or a [bank holding company](/usc/12/5301.md?p=18-A) described in [subsection (a)](#a) and the [company](/usc/12/5381.md?p=a-5); and
    - (F) any other similar transactions that the [Board of Governors](/usc/12/5301.md?p=3), by regulation, determines to be a [credit](/usc/12/5481.md?p=7) exposure for purposes of this section.
  - (4) **Attribution rule—** For purposes of this subsection, any transaction by a [nonbank financial company supervised by the Board of Governors](/usc/12/5311.md?p=a-4-D) or a [bank holding company](/usc/12/5301.md?p=18-A) described in [subsection (a)](#a) with any [person](/usc/12/5481.md?p=19) is a transaction with a [company](/usc/12/5381.md?p=a-5), to the extent that the proceeds of the transaction are used for the benefit of, or transferred to, that [company](/usc/12/5381.md?p=a-5).
  - (5) **Rulemaking—** The [Board of Governors](/usc/12/5301.md?p=3) may issue such regulations and orders, [including](/usc/12/5301.md?p=18-A) definitions consistent with this section, as may be necessary to administer and carry out this subsection.
  - (6) **Exemptions—** This subsection shall not apply to any Federal home loan [bank](/usc/12/5301.md?p=18-A). The [Board of Governors](/usc/12/5301.md?p=3) may, by regulation or order, exempt transactions, in whole or in part, from the definition of the term “[credit](/usc/12/5481.md?p=7) exposure” for purposes of this subsection, if the [Board of Governors](/usc/12/5301.md?p=3) finds that the exemption is in the public interest and is consistent with the purpose of this subsection.
  - (7) **Transition period—**
    - (A) **In general—** This subsection and any regulations and orders of the [Board of Governors](/usc/12/5301.md?p=3) under this subsection shall not be effective until 3 years after July 21, 2010.
    - (B) **Extension authorized—** The [Board of Governors](/usc/12/5301.md?p=3) may extend the period specified in [subparagraph (A)](#e-7-A) for not longer than an additional 2 years.
- (f) **Enhanced public disclosures—** The [Board of Governors](/usc/12/5301.md?p=3) may prescribe, by regulation, periodic public disclosures by [nonbank financial companies](/usc/12/5311.md?p=a-4-C) supervised by the [Board of Governors](/usc/12/5301.md?p=3) and [bank holding companies](/usc/12/5301.md?p=18-A) described in [subsection (a)](#a) in order to support market evaluation of the risk profile, capital adequacy, and risk management capabilities thereof.
- (g) **Short-term debt limits—**
  - (1) **In general—** In order to mitigate the risks that an over-accumulation of short-term debt could pose to [financial companies](/usc/12/5341.md?p=2) and to the stability of the United States financial system, the [Board of Governors](/usc/12/5301.md?p=3) may, by regulation, prescribe a limit on the amount of short-term debt, [including](/usc/12/5301.md?p=18-A) off-balance sheet exposures, that may be accumulated by any [bank holding company](/usc/12/5301.md?p=18-A) described in [subsection (a)](#a) and any [nonbank financial company supervised by the Board of Governors](/usc/12/5311.md?p=a-4-D).
  - (2) **Basis of limit—** Any limit prescribed under [paragraph (1)](#g-1) shall be based on the short-term debt of the [company](/usc/12/5381.md?p=a-5) described in [paragraph (1)](#g-1) as a percentage of capital stock and surplus of the [company](/usc/12/5381.md?p=a-5) or on such other measure as the [Board of Governors](/usc/12/5301.md?p=3) considers appropriate.
  - (3) **Short-term debt defined—** For purposes of this subsection, the term “short-term debt” means such liabilities with short-dated maturity that the [Board of Governors](/usc/12/5301.md?p=3) identifies, by regulation, except that such term does not include insured [deposits](/usc/12/5301.md?p=18-A).
  - (4) **Rulemaking authority—** In addition to prescribing regulations under paragraphs [(1)](#g-1) and [(3)](#g-3), the [Board of Governors](/usc/12/5301.md?p=3) may prescribe such regulations, [including](/usc/12/5301.md?p=18-A) definitions consistent with this subsection, and issue such orders, as may be necessary to carry out this subsection.
  - (5) **Authority to issue exemptions and adjustments—** Notwithstanding the Bank Holding Company Act of 1956 ([12 U.S.C. 1841](/usc/12/1841.md) et seq.), the [Board of Governors](/usc/12/5301.md?p=3) may, if it determines such action is necessary to ensure appropriate heightened prudential supervision, with respect to a [company](/usc/12/5381.md?p=a-5) described in [paragraph (1)](#g-1) that does not [control](/usc/12/5301.md?p=18-A) an [insured depository institution](/usc/12/5301.md?p=18-A), issue to such [company](/usc/12/5381.md?p=a-5) an exemption from or adjustment to the limit prescribed under [paragraph (1)](#g-1).
- (h) **Risk committee—**
  - (1) **Nonbank financial companies supervised by the Board of Governors—** The [Board of Governors](/usc/12/5301.md?p=3) shall require each [nonbank financial company supervised by the Board of Governors](/usc/12/5311.md?p=a-4-D) that is a publicly traded [company](/usc/12/5381.md?p=a-5) to establish a risk committee, as set forth in [paragraph (3)](#h-3), not later than 1 year after the date of receipt of a notice of final determination under [section 5323(e)(3) of this title](/usc/12/5323.md?p=e-3) with respect to such [nonbank financial company supervised by the Board of Governors](/usc/12/5311.md?p=a-4-D).
  - (2) **Certain bank holding companies—**
    - (A) **Mandatory regulations—** The [Board of Governors](/usc/12/5301.md?p=3) shall issue regulations requiring each [bank holding company](/usc/12/5301.md?p=18-A) that is a publicly traded [company](/usc/12/5381.md?p=a-5) and that has total consolidated assets of not less than $50,000,000,000 to establish a risk committee, as set forth in [paragraph (3)](#h-3).
    - (B) **Permissive regulations—** The [Board of Governors](/usc/12/5301.md?p=3) may require each [bank holding company](/usc/12/5301.md?p=18-A) that is a publicly traded [company](/usc/12/5381.md?p=a-5) and that has total consolidated assets of less than $50,000,000,000 to establish a risk committee, as set forth in [paragraph (3)](#h-3), as determined necessary or appropriate by the [Board of Governors](/usc/12/5301.md?p=3) to promote sound risk management practices.
  - (3) **Risk committee—** A 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](/usc/12/5311.md?p=a-4-D) or [bank holding company](/usc/12/5301.md?p=18-A) described in [subsection (a)](#a), as applicable;
    - (B) include such number of independent [directors](/usc/12/5341.md?p=1) as the [Board of Governors](/usc/12/5301.md?p=3) 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](/usc/12/5311.md?p=a-4-D) or a [bank holding company](/usc/12/5301.md?p=18-A) described in [subsection (a)](#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—** The [Board of Governors](/usc/12/5301.md?p=3) shall issue final rules to carry out this subsection, not later than 1 year after the [transfer date](/usc/12/5301.md?p=17), to take effect not later than 15 months after the [transfer date](/usc/12/5301.md?p=17).
- (i) **Stress tests—**
  - (1) **By the Board of Governors—**
    - (A) **Annual tests required—** The [Board of Governors](/usc/12/5301.md?p=3), in coordination with the appropriate [primary financial regulatory agencies](/usc/12/5301.md?p=12) and the Federal Insurance [Office](/usc/12/5341.md?p=1), shall conduct annual analyses in which [nonbank financial companies](/usc/12/5311.md?p=a-4-C) supervised by the [Board of Governors](/usc/12/5301.md?p=3) and [bank holding companies](/usc/12/5301.md?p=18-A) described in [subsection (a)](#a) are subject to evaluation of whether such [companies](/usc/12/5381.md?p=a-5) have the capital, on a total consolidated basis, necessary to absorb losses as a result of adverse economic conditions.
    - (B) **Test parameters and consequences—** The [Board of Governors](/usc/12/5301.md?p=3)—
      - (i) shall provide for at least 2 different sets of conditions under which the evaluation required by this subsection shall be conducted, [including](/usc/12/5301.md?p=18-A) baseline and severely adverse;
      - (ii) may require the tests described in [subparagraph (A)](#i-1-A) at [bank holding companies](/usc/12/5301.md?p=18-A) and [nonbank financial companies](/usc/12/5311.md?p=a-4-C), in addition to those for which annual tests are required under [subparagraph (A)](#i-1-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](/usc/12/5381.md?p=a-5) described in [subparagraph (A)](#i-1-A) to update their resolution plans required under [subsection (d)(1)](#d-1), as the [Board of Governors](/usc/12/5301.md?p=3) 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)](#i-1-A) or clause (ii) of this subparagraph.
  - (2) **By the company—**
    - (A) **Requirement—** A [nonbank financial company supervised by the Board of Governors](/usc/12/5311.md?p=a-4-D) and a [bank holding company](/usc/12/5301.md?p=18-A) described in [subsection (a)](#a) shall conduct periodic stress tests. All other [financial companies](/usc/12/5341.md?p=2) that have total consolidated assets of more than $250,000,000,000 and are regulated by a primary Federal financial regulatory agency shall conduct periodic stress tests. The tests required under this subparagraph shall be conducted in accordance with the regulations prescribed under [subparagraph (C)](#i-2-C).
    - (B) **Report—** A [company](/usc/12/5381.md?p=a-5) required to conduct stress tests under [subparagraph (A)](#i-2-A) shall submit a report to the [Board of Governors](/usc/12/5301.md?p=3) and to its [primary financial regulatory agency](/usc/12/5301.md?p=12) at such time, in such form, and containing such information as the [primary financial regulatory agency](/usc/12/5301.md?p=12) shall require.
    - (C) **Regulations—** Each Federal [primary financial regulatory agency](/usc/12/5301.md?p=12), in coordination with the [Board of Governors](/usc/12/5301.md?p=3) and the Federal Insurance [Office](/usc/12/5341.md?p=1), 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](/usc/12/5301.md?p=18-A) baseline and severely adverse;
      - (iii) establish the form and content of the report required by [subparagraph (B)](#i-2-B); and
      - (iv) require [companies](/usc/12/5381.md?p=a-5) subject to this paragraph to publish a summary of the results of the required stress tests.
- (j) **Leverage limitation—**
  - (1) **Requirement—** The [Board of Governors](/usc/12/5301.md?p=3) shall require a [bank holding company](/usc/12/5301.md?p=18-A) with total consolidated assets equal to or greater than $250,000,000,000 or a [nonbank financial company supervised by the Board of Governors](/usc/12/5311.md?p=a-4-D) to maintain a debt to equity ratio of no more than 15 to 1, upon a determination by the [Council](/usc/12/5301.md?p=8) that such [company](/usc/12/5381.md?p=a-5) poses a grave threat to the financial stability of the United States and that the imposition of such requirement is necessary to mitigate the risk that such [company](/usc/12/5381.md?p=a-5) poses to the financial stability of the United States. Nothing in this paragraph shall apply to a Federal home loan [bank](/usc/12/5301.md?p=18-A).
  - (2) **Considerations—** In making a determination under this subsection, the [Council](/usc/12/5301.md?p=8) shall consider the factors described in subsections (a) and (b) of [section 5323 of this title](/usc/12/5323.md) and any other risk-related factors that the [Council](/usc/12/5301.md?p=8) deems appropriate.
  - (3) **Regulations—** The [Board of Governors](/usc/12/5301.md?p=3) shall promulgate regulations to establish procedures and timelines for complying with the requirements of this subsection.
- (k) **Inclusion of off-balance-sheet activities in computing capital requirements—**
  - (1) **In general—** In the case of any [bank holding company](/usc/12/5301.md?p=18-A) described in [subsection (a)](#a) or [nonbank financial company supervised by the Board of Governors](/usc/12/5311.md?p=a-4-D), the computation of capital for purposes of meeting capital requirements shall take into account any off-balance-sheet activities of the [company](/usc/12/5381.md?p=a-5).
  - (2) **Exemptions—** If the [Board of Governors](/usc/12/5301.md?p=3) determines that an exemption from the requirement under [paragraph (1)](#k-1) is appropriate, the [Board of Governors](/usc/12/5301.md?p=3) may exempt a [company](/usc/12/5381.md?p=a-5), or any transaction or transactions engaged in by such [company](/usc/12/5381.md?p=a-5), from the requirements of [paragraph (1)](#k-1).
  - (3) **Off-balance-sheet activities defined—** For purposes of this subsection, the term “off-balance-sheet activities” means an existing liability of a [company](/usc/12/5381.md?p=a-5) that is not currently a balance sheet liability, but may become one upon the happening of some future event, [including](/usc/12/5301.md?p=18-A) the following transactions, to the extent that they may create a liability:
    - (A) Direct [credit](/usc/12/5481.md?p=7) substitutes in which a [bank](/usc/12/5301.md?p=18-A) substitutes its own [credit](/usc/12/5481.md?p=7) for a third party, [including](/usc/12/5301.md?p=18-A) standby letters of [credit](/usc/12/5481.md?p=7).
    - (B) Irrevocable letters of [credit](/usc/12/5481.md?p=7) 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](/usc/12/5301.md?p=6).
    - (G) [Credit](/usc/12/5481.md?p=7) [swaps](/usc/12/5301.md?p=6).
    - (H) Commodities contracts.
    - (I) Forward contracts.
    - (J) Securities contracts.
    - (K) Such other activities or transactions as the [Board of Governors](/usc/12/5301.md?p=3) may, by rule, define.

## Source credit

(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.)

## Notes

### Editorial Notes

### References in Text

Subchapter II, referred to in subsec. (d)(6), was in the original “title II”, meaning title II of Pub. L. 111–203, July 21, 2010, 124 Stat. 1442, which is classified principally to subchapter II (§ 5381 et seq.) of this chapter. For complete classification of title II to the Code, see Tables.

The Bank Holding Company Act of 1956, referred to in subsec. (g)(5), is act May 9, 1956, ch. 240, 70 Stat. 133, which is classified principally to chapter 17 (§ 1841 et seq.) of this title. For complete classification of this Act to the Code, see Short Title note set out under section 1841 of this title and Tables.

### Amendments

2018—Subsec. (a)(1). Pub. L. 115–174, § 401(a)(1)(A), substituted “$250,000,000,000” for “$50,000,000,000” in introductory provisions.

Subsec. (a)(2)(A). Pub. L. 115–174, § 401(a)(1)(B)(i), substituted “the Board of Governors shall” for “the Board of Governors may”.

Subsec. (a)(2)(B). Pub. L. 115–174, § 401(a)(1)(B)(ii), substituted “the applicable threshold” for “$50,000,000,000”.

Subsec. (a)(2)(C). Pub. L. 115–174, § 401(a)(1)(B)(iii), added subpar. (C).

Subsec. (b)(1)(A)(iv). Pub. L. 115–174, § 401(a)(2)(A), struck out “and credit exposure report” after “resolution plan”.

Subsec. (b)(1)(B)(ii). Pub. L. 115–174, § 401(a)(2)(B), inserted “, including credit exposure reports” before semicolon at end.

Subsec. (d)(2). Pub. L. 115–174, § 401(a)(3), substituted “The Board of Governors may” for “The Board of Governors shall” in introductory provisions.

Subsec. (h)(2). Pub. L. 115–174, § 401(a)(4), substituted “$50,000,000,000” for “$10,000,000,000” in two places.

Subsec. (i)(1)(B)(i). Pub. L. 115–174, § 401(a)(5)(A), substituted “2 different sets” for “3 different sets” and struck out “, adverse,” after “baseline”.

Subsec. (i)(2)(A). Pub. L. 115–174, § 401(a)(5)(B)(i), in first sentence, substituted “periodic” for “semiannual” and, in second sentence, substituted “$250,000,000,000” for “$10,000,000,000” and “periodic” for “annual”.

Subsec. (i)(2)(C)(ii). Pub. L. 115–174, § 401(a)(5)(B)(ii), substituted “2 different sets” for “3 different sets” and struck out “, adverse,” after “baseline”.

Subsec. (j)(1). Pub. L. 115–174, § 401(a)(6), substituted “$250,000,000,000” for “$50,000,000,000”.

### Statutory Notes and Related Subsidiaries

### Effective Date of 2018 Amendment

Pub. L. 115–174, title IV, § 401(d), May 24, 2018, 132 Stat. 1358, provided that: In general.—Except as provided in paragraph (2), the amendments made by this section [amending this section and sections 248, 5325, 5326, 5331, 5345, 5363, and 5364 of this title] shall take effect on the date that is 18 months after the date of enactment of this Act [May 24, 2018]. Exception.—Notwithstanding paragraph (1), the amendments made by this section shall take effect on the date of enactment of this Act with respect to any bank holding company with total consolidated assets of less than $100,000,000,000. Additional authority.—Before the effective date described in paragraph (1), the Board of Governors of the Federal Reserve System may by order exempt any bank holding company with total consolidated assets of less than $250,000,000,000 from any prudential standard under section 165 of the Financial Stability Act of 2010 (12 U.S.C. 5365). Rule of construction.—Nothing in this section [amending this section and sections 248, 5325, 5326, 5331, 5345, 5363, and 5364 of this title and enacting provisions set out as notes under this section] shall be construed to prohibit the Board of Governors of the Federal Reserve System from issuing an order or rule making under section 165(a)(2)(C) of the Financial Stability Act of 2010 (12 U.S.C. 5365(a)(2)(C)), as added by this section, before the effective date described in paragraph (1).”

[For definition of “bank holding company” as used in section 401(d) of Pub. L. 115–174, set out above, see section 2 of Pub. L. 115–174, set out as a Definitions note below.]

### Construction of 2018 Amendment

Pub. L. 115–174, title IV, § 401(b), May 24, 2018, 132 Stat. 1357, provided that: “Nothing in subsection (a) [amending this section] shall be construed to limit— the authority of the Board of Governors of the Federal Reserve System, in prescribing prudential standards under section 165 of the Financial Stability Act of 2010 (12 U.S.C. 5365) or any other law, to tailor or differentiate among companies on an individual basis or by category, taking into consideration their capital structure, riskiness, complexity, financial activities (including financial activities of their subsidiaries), size, and any other risk-related factors that the Board of Governors deems appropriate; or the supervisory, regulatory, or enforcement authority of an appropriate Federal banking agency to further the safe and sound operation of an institution under the supervision of the appropriate Federal banking agency.”

[For definitions of “appropriate Federal banking agency” and “companies” as used in section 401(b) of Pub. L. 115–174, set out above, see section 2 of Pub. L. 115–174, set out as a Definitions note below.]

Pub. L. 115–174, title IV, § 401(g), May 24, 2018, 132 Stat. 1359, provided that: “Nothing in this section [amending this section and sections 248, 5325, 5326, 5331, 5345, 5363, and 5364 of this title and enacting provisions set out as notes under this section] shall be construed to— affect the legal effect of the final rule of the Board of Governors of the Federal Reserve System entitled ‘Enhanced Prudential Standards for Bank Holding Companies and Foreign Banking Organizations’ (79 Fed. Reg. 17240 (March 27, 2014)) as applied to foreign banking organizations with total consolidated assets equal to or greater than $100,000,000,000; or limit the authority of the Board of Governors of the Federal Reserve System to require the establishment of an intermediate holding company under, implement enhanced prudential standards with respect to, or tailor the regulation of a foreign banking organization with total consolidated assets equal to or greater than $100,000,000,000.”

### Supervisory Stress Test

Pub. L. 115–174, title IV, § 401(e), May 24, 2018, 132 Stat. 1359, provided that: “Beginning on the effective date described in subsection (d)(1) [of section 401 of Pub. L. 115–174, set out above], the Board of Governors of the Federal Reserve System shall, on a periodic basis, conduct supervisory stress tests of bank holding companies with total consolidated assets equal to or greater than $100,000,000,000 and total consolidated assets of less than $250,000,000,000 to evaluate whether such bank holding companies have the capital, on a total consolidated basis, necessary to absorb losses as a result of adverse economic conditions.”

[For definition of “bank holding companies” as used in section 401(e) of Pub. L. 115–174, set out above, see section 2 of Pub. L. 115–174, set out as a Definitions note below.]

### Global Systemically Important Bank Holding Companies

Pub. L. 115–174, title IV, § 401(f), May 24, 2018, 132 Stat. 1359, provided that: “Any bank holding company, regardless of asset size, that has been identified as a global systemically important BHC under section 217.402 of title 12, Code of Federal Regulations, shall be considered a bank holding company with total consolidated assets equal to or greater than $250,000,000,000 with respect to the application of standards or requirements under— this section [amending this section and sections 248, 5325, 5326, 5331, 5345, 5363, and 5364 of this title and enacting provisions set out as notes under this section]; sections 116(a), 121(a), 155(d), 163(b), 164, and 165 of the Financial Stability Act of 2010 (12 U.S.C. 5326(a), 5331(a), 5345(d), 5363(b), 5364, 5365); and paragraph (2)(A) of the second subsection (s) (relating to assessments) of section 11 of the Federal Reserve Act (12 U.S.C. 248(s)(2)[(A)]).”

[For definition of “bank holding company” as used in section 401(f) of Pub. L. 115–174, set out above, see section 2 of Pub. L. 115–174, set out as a Definitions note below.]

### Definitions

Pub. L. 115–174, § 2, May 24, 2018, 132 Stat. 1297, provided that: “In this Act [see Short Title of 2018 Amendment note set out under section 1601 of Title 15, Commerce and Trade]: Appropriate federal banking agency; company; depository institution; depository institution holding company.—The terms ‘appropriate Federal banking agency’, ‘company’, ‘depository institution’, and ‘depository institution holding company’ have the meanings given those terms in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813). Bank holding company.—The term ‘bank holding company’ has the meaning given the term in section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 1841).”