---
kind: "section"
citation: "12 U.S.C. § 5383"
title: "12"
title_heading: "Banks and Banking"
number: "5383"
heading: "Systemic risk determination"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/12/5383"
units:
  - "Chapter 53 — Wall Street Reform and Consumer Protection"
  - "Subchapter II — Orderly Liquidation Authority"
---

# §5383. Systemic risk determination

- (a) **Written recommendation and determination—**
  - (1) **Vote required—**
    - (A) **In general—** On their own initiative, or at the request of the [Secretary](/usc/12/5301.md?p=14), the [Corporation](/usc/12/5301.md?p=7) and the [Board of Governors](/usc/12/5301.md?p=3) shall consider whether to make a written recommendation described in [paragraph (2)](#a-2) with respect to whether the [Secretary](/usc/12/5301.md?p=14) should appoint the [Corporation](/usc/12/5301.md?p=7) as receiver for a [financial company](/usc/12/5341.md?p=2). Such recommendation shall be made upon a vote of not fewer than ⅔ of the members of the [Board of Governors](/usc/12/5301.md?p=3) then serving and ⅔ of the members of the [board](/usc/12/1861.md?p=b-3) of [directors](/usc/12/5341.md?p=1) of the [Corporation](/usc/12/5301.md?p=7) then serving.
    - (B) **Cases involving brokers or dealers—** In the case of a broker or dealer, or in which the largest United States [subsidiary](/usc/12/5301.md?p=18-A) (as measured by total assets as of the end of the previous calendar quarter) of a [financial company](/usc/12/5341.md?p=2) is a broker or dealer, the [Commission](/usc/12/5301.md?p=5) and the [Board of Governors](/usc/12/5301.md?p=3), at the request of the [Secretary](/usc/12/5301.md?p=14), or on their own initiative, shall consider whether to make the written recommendation described in [paragraph (2)](#a-2) with respect to the [financial company](/usc/12/5341.md?p=2). Subject to the requirements in [paragraph (2)](#a-2), such recommendation shall be made upon a vote of not fewer than ⅔ of the members of the [Board of Governors](/usc/12/5301.md?p=3) then serving and ⅔ of the members of the [Commission](/usc/12/5301.md?p=5) then serving, and in consultation with the [Corporation](/usc/12/5301.md?p=7).
    - (C) **Cases involving insurance companies—** In the case of an [insurance company](/usc/12/5381.md?p=a-13), or in which the largest United States [subsidiary](/usc/12/5301.md?p=18-A) (as measured by total assets as of the end of the previous calendar quarter) of a [financial company](/usc/12/5341.md?p=2) is an [insurance company](/usc/12/5381.md?p=a-13), the [Director](/usc/12/5341.md?p=1) of the Federal Insurance [Office](/usc/12/5341.md?p=1) and the [Board of Governors](/usc/12/5301.md?p=3), at the request of the [Secretary](/usc/12/5301.md?p=14) or on their own initiative, shall consider whether to make the written recommendation described in [paragraph (2)](#a-2) with respect to the [financial company](/usc/12/5341.md?p=2). Subject to the requirements in [paragraph (2)](#a-2), such recommendation shall be made upon a vote of not fewer than ⅔ of the [Board of Governors](/usc/12/5301.md?p=3) then serving and the affirmative approval of the [Director](/usc/12/5341.md?p=1) of the Federal Insurance [Office](/usc/12/5341.md?p=1), and in consultation with the [Corporation](/usc/12/5301.md?p=7).
  - (2) **Recommendation required—** Any written recommendation pursuant to [paragraph (1)](#a-1) shall contain—
    - (A) an evaluation of whether the [financial company](/usc/12/5341.md?p=2) is in default or in danger of default;
    - (B) a description of the effect that the default of the [financial company](/usc/12/5341.md?p=2) would have on financial stability in the United States;
    - (C) a description of the effect that the default of the [financial company](/usc/12/5341.md?p=2) would have on economic conditions or financial stability for low income, minority, or underserved communities;
    - (D) a recommendation regarding the nature and the extent of actions to be taken under this subchapter regarding the [financial company](/usc/12/5341.md?p=2);
    - (E) an evaluation of the likelihood of a private sector alternative to prevent the default of the [financial company](/usc/12/5341.md?p=2);
    - (F) an evaluation of why a case under the [Bankruptcy Code](/usc/12/5381.md?p=a-2) is not appropriate for the [financial company](/usc/12/5341.md?p=2);
    - (G) an evaluation of the effects on creditors, counterparties, and shareholders of the [financial company](/usc/12/5341.md?p=2) and other market participants; and
    - (H) an evaluation of whether the [company](/usc/12/5381.md?p=a-5) satisfies the definition of a [financial company](/usc/12/5341.md?p=2) under [section 5381 of this title](/usc/12/5381.md).
- (b) **Determination by the Secretary—** Notwithstanding any other provision of Federal or [State](/usc/12/5301.md?p=16) law, the [Secretary](/usc/12/5301.md?p=14) shall take action in accordance with [section 5382(a)(1)(A) of this title](/usc/12/5382.md?p=a-1-A), if, upon the written recommendation under [subsection (a)](#a), the [Secretary](/usc/12/5301.md?p=14) (in consultation with the President) determines that—
  - (1) the [financial company](/usc/12/5341.md?p=2) is in default or in danger of default;
  - (2) the failure of the [financial company](/usc/12/5341.md?p=2) and its resolution under otherwise applicable Federal or [State](/usc/12/5301.md?p=16) law would have serious adverse effects on financial stability in the United States;
  - (3) no viable private sector alternative is available to prevent the default of the [financial company](/usc/12/5341.md?p=2);
  - (4) any effect on the [claims](/usc/12/5381.md?p=a-4) or interests of creditors, counterparties, and shareholders of the [financial company](/usc/12/5341.md?p=2) and other market participants as a result of actions to be taken under this subchapter is appropriate, given the impact that any action taken under this subchapter would have on financial stability in the United States;
  - (5) any action under [section 5384 of this title](/usc/12/5384.md) would avoid or mitigate such adverse effects, taking into consideration the effectiveness of the action in mitigating potential adverse effects on the financial system, the cost to the general [fund](/usc/12/5381.md?p=a-12) of the Treasury, and the potential to increase excessive risk taking on the part of creditors, counterparties, and shareholders in the [financial company](/usc/12/5341.md?p=2);
  - (6) a Federal regulatory agency has ordered the [financial company](/usc/12/5341.md?p=2) to convert all of its convertible debt instruments that are subject to the regulatory order; and
  - (7) the [company](/usc/12/5381.md?p=a-5) satisfies the definition of a [financial company](/usc/12/5341.md?p=2) under [section 5381 of this title](/usc/12/5381.md).
- (c) **Documentation and review—**
  - (1) **In general—** The [Secretary](/usc/12/5301.md?p=14) shall—
    - (A) document any determination under [subsection (b)](#b);
    - (B) retain the documentation for review under [paragraph (2)](#c-2); and
    - (C) notify the [covered financial company](/usc/12/5381.md?p=a-8) and the [Corporation](/usc/12/5301.md?p=7) of such determination.
  - (2) **Report to Congress—** Not later than 24 hours after the date of appointment of the [Corporation](/usc/12/5301.md?p=7) as receiver for a [covered financial company](/usc/12/5381.md?p=a-8), the [Secretary](/usc/12/5301.md?p=14) shall provide written notice of the recommendations and determinations reached in accordance with subsections [(a)](#a) and [(b)](#b) to the Majority Leader and the Minority Leader of the Senate and the Speaker and the Minority Leader of the House of Representatives, the Committee on Banking, Housing, and Urban Affairs of the Senate, and the Committee on Financial Services of the House of Representatives, which shall consist of a summary of the basis for the determination, [including](/usc/12/5301.md?p=18-A), to the extent available at the time of the determination—
    - (A) the size and financial condition of the [covered financial company](/usc/12/5381.md?p=a-8);
    - (B) the sources of capital and [credit](/usc/12/5481.md?p=7) support that were available to the [covered financial company](/usc/12/5381.md?p=a-8);
    - (C) the operations of the [covered financial company](/usc/12/5381.md?p=a-8) that could have had a significant impact on financial stability, markets, or both;
    - (D) identification of the [banks](/usc/12/5301.md?p=18-A) and [financial companies](/usc/12/5341.md?p=2) which may be able to provide the services offered by the [covered financial company](/usc/12/5381.md?p=a-8);
    - (E) any potential international ramifications of resolution of the [covered financial company](/usc/12/5381.md?p=a-8) under other applicable insolvency law;
    - (F) an estimate of the potential effect of the resolution of the [covered financial company](/usc/12/5381.md?p=a-8) under other applicable insolvency law on the financial stability of the United States;
    - (G) the potential effect of the appointment of a receiver by the [Secretary](/usc/12/5301.md?p=14) on [consumers](/usc/12/5481.md?p=4);
    - (H) the potential effect of the appointment of a receiver by the [Secretary](/usc/12/5301.md?p=14) on the financial system, financial markets, and [banks](/usc/12/5301.md?p=18-A) and other [financial companies](/usc/12/5341.md?p=2); and
    - (I) whether resolution of the [covered financial company](/usc/12/5381.md?p=a-8) under other applicable insolvency law would cause [banks](/usc/12/5301.md?p=18-A) or other [financial companies](/usc/12/5341.md?p=2) to experience severe liquidity distress.
  - (3) **Reports to Congress and the public—**
    - (A) **In general—** Not later than 60 days after the date of appointment of the [Corporation](/usc/12/5301.md?p=7) as receiver for a [covered financial company](/usc/12/5381.md?p=a-8), the [Corporation](/usc/12/5301.md?p=7) shall file a report with the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives—
      - (i) setting forth information on the financial condition of the [covered financial company](/usc/12/5381.md?p=a-8) as of the date of the appointment, [including](/usc/12/5301.md?p=18-A) a description of its assets and liabilities;
      - (ii) describing the plan of, and actions taken by, the [Corporation](/usc/12/5301.md?p=7) to wind down the [covered financial company](/usc/12/5381.md?p=a-8);
      - (iii) explaining each instance in which the [Corporation](/usc/12/5301.md?p=7) waived any applicable requirements of part 366 of title 12, Code of Federal Regulations (or any successor thereto) with respect to conflicts of interest by any [person](/usc/12/5481.md?p=19) in the private sector who was retained to provide services to the [Corporation](/usc/12/5301.md?p=7) in connection with such receivership;
      - (iv) describing the reasons for the provision of any funding to the receivership out of the [Fund](/usc/12/5381.md?p=a-12);
      - (v) setting forth the expected costs of the orderly liquidation of the [covered financial company](/usc/12/5381.md?p=a-8);
      - (vi) setting forth the identity of any claimant that is treated in a manner different from other similarly situated claimants under subsection [(b)(4)](#b-4), (d)(4), or (h)(5)(E), the amount of any additional payment to such claimant under subsection (d)(4), and the reason for any such action; and
      - (vii) which report the [Corporation](/usc/12/5301.md?p=7) shall publish on an online website maintained by the [Corporation](/usc/12/5301.md?p=7), subject to maintaining appropriate confidentiality.
    - (B) **Amendments—** The [Corporation](/usc/12/5301.md?p=7) shall, on a timely basis, not less frequently than quarterly, amend or revise and resubmit the reports prepared under this paragraph, as necessary.
    - (C) **Congressional testimony—** The [Corporation](/usc/12/5301.md?p=7) and the [primary financial regulatory agency](/usc/12/5301.md?p=12), if any, of the [financial company](/usc/12/5341.md?p=2) for which the [Corporation](/usc/12/5301.md?p=7) was appointed receiver under this subchapter shall appear before Congress, if requested, not later than 30 days after the date on which the [Corporation](/usc/12/5301.md?p=7) first files the reports required under [subparagraph (A)](#c-3-A).
  - (4) **Default or in danger of default—** For purposes of this subchapter, a [financial company](/usc/12/5341.md?p=2) shall be considered to be in default or in danger of default if, as determined in accordance with [subsection (b)](#b)—
    - (A) a case has been, or likely will promptly be, commenced with respect to the [financial company](/usc/12/5341.md?p=2) under the [Bankruptcy Code](/usc/12/5381.md?p=a-2);
    - (B) the [financial company](/usc/12/5341.md?p=2) has incurred, or is likely to incur, losses that will deplete all or substantially all of its capital, and there is no reasonable prospect for the [company](/usc/12/5381.md?p=a-5) to avoid such depletion;
    - (C) the assets of the [financial company](/usc/12/5341.md?p=2) are, or are likely to be, less than its obligations to creditors and others; or
    - (D) the [financial company](/usc/12/5341.md?p=2) is, or is likely to be, unable to pay its obligations (other than those subject to a bona fide dispute) in the normal course of business.
  - (5) **GAO review—** The Comptroller General of the United States shall review and report to Congress on any determination under [subsection (b)](#b), that results in the appointment of the [Corporation](/usc/12/5301.md?p=7) as receiver, [including](/usc/12/5301.md?p=18-A)—
    - (A) the basis for the determination;
    - (B) the purpose for which any action was taken pursuant thereto;
    - (C) the likely effect of the determination and such action on the incentives and conduct of [financial companies](/usc/12/5341.md?p=2) and their creditors, counterparties, and shareholders; and
    - (D) the likely disruptive effect of the determination and such action on the reasonable expectations of creditors, counterparties, and shareholders, taking into account the impact any action under this subchapter would have on financial stability in the United States, [including](/usc/12/5301.md?p=18-A) whether the rights of such parties will be disrupted.
- (d) **Corporation policies and procedures—** As soon as is practicable after July 21, 2010, the [Corporation](/usc/12/5301.md?p=7) shall establish policies and procedures that are acceptable to the [Secretary](/usc/12/5301.md?p=14) governing the use of [funds](/usc/12/5381.md?p=a-12) available to the [Corporation](/usc/12/5301.md?p=7) to carry out this subchapter, [including](/usc/12/5301.md?p=18-A) the terms and conditions for the provision and use of [funds](/usc/12/5381.md?p=a-12) under sections [5384(d)](/usc/12/5384.md?p=d), [5390(h)(2)(G)(iv)](/usc/12/5390.md?p=h-2-G-iv), and [5390(h)(9)](/usc/12/5390.md?p=h-9) of this title.
- (e) **Treatment of insurance companies and insurance company subsidiaries—**
  - (1) **In general—** Notwithstanding [subsection (b)](#b), if an [insurance company](/usc/12/5381.md?p=a-13) is a [covered financial company](/usc/12/5381.md?p=a-8) or a [subsidiary](/usc/12/5301.md?p=18-A) or [affiliate](/usc/12/5301.md?p=1) of a [covered financial company](/usc/12/5381.md?p=a-8), the liquidation or rehabilitation of such [insurance company](/usc/12/5381.md?p=a-13), and any [subsidiary](/usc/12/5301.md?p=18-A) or [affiliate](/usc/12/5301.md?p=1) of such [company](/usc/12/5381.md?p=a-5) that is not excepted under [paragraph (2)](#e-2), shall be conducted as provided under applicable [State](/usc/12/5301.md?p=16) law.
  - (2) **Exception for subsidiaries and affiliates—** The requirement of [paragraph (1)](#e-1) shall not apply with respect to any [subsidiary](/usc/12/5301.md?p=18-A) or [affiliate](/usc/12/5301.md?p=1) of an [insurance company](/usc/12/5381.md?p=a-13) that is not itself an [insurance company](/usc/12/5381.md?p=a-13).
  - (3) **Backup authority—** Notwithstanding [paragraph (1)](#e-1), with respect to a [covered financial company](/usc/12/5381.md?p=a-8) described in [paragraph (1)](#e-1), if, after the end of the 60-day period beginning on the date on which a determination is made under [section 5382(a) of this title](/usc/12/5382.md?p=a) with respect to such [company](/usc/12/5381.md?p=a-5), the appropriate regulatory agency has not filed the appropriate judicial action in the appropriate [State](/usc/12/5301.md?p=16) [court](/usc/12/5381.md?p=a-6) to place such [company](/usc/12/5381.md?p=a-5) into orderly liquidation or rehabilitation under the laws and requirements of the [State](/usc/12/5301.md?p=16), the [Corporation](/usc/12/5301.md?p=7) shall have the authority to stand in the place of the appropriate regulatory agency and file the appropriate judicial action in the appropriate [State](/usc/12/5301.md?p=16) [court](/usc/12/5381.md?p=a-6) to place such [company](/usc/12/5381.md?p=a-5) into orderly liquidation or rehabilitation under the laws and requirements of the [State](/usc/12/5301.md?p=16).

## Source credit

(Pub. L. 111–203, title II, § 203, July 21, 2010, 124 Stat. 1450; Pub. L. 114–113, div. O, title VII, § 706(b)(1), Dec. 18, 2015, 129 Stat. 3029.)

## Notes

### Editorial Notes

### References in Text

This subchapter, referred to in subsecs. (a) to (d), was in the original “this title”, meaning title II of Pub. L. 111–203, July 21, 2010, 124 Stat. 1442, which is classified principally to this subchapter. For complete classification of title II to the Code, see Tables.

### Amendments

2015—Subsec. (e)(3). Pub. L. 114–113 inserted “or rehabilitation” after “orderly liquidation” in two places.

### Statutory Notes and Related Subsidiaries

### Effective Date

Section effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as a note under section 5301 of this title.