12 U.S.C. § 5325 — 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. To prevent or reduce risks to the financial stability of the United States that could result from the serious financial distress, failure, or ongoing activities of large, interconnected financial institutions, the Council may make recommendations to the Board of Governors about establishing or refining prudential standards and reporting and disclosure requirements for nonbank financial companies supervised by the Board of Governors and large, interconnected bank holding companies. The recommendations may provide for standards that—
(A) are more stringent than the standards for other nonbank financial companies and bank holding companies that do not present similar risks to United States financial stability; and
(B) increase in stringency based on the considerations identified in subsection (b)(3).
(2) Recommended application of required standards. In making recommendations under this section, the Council may—
(A) differentiate among companies subject to heightened standards, individually or by category, considering their capital structure, riskiness, complexity, financial activities, including their subsidiaries’ financial activities, size, and any other risk-related factors the Council considers appropriate; or
(B) recommend an asset threshold higher than the applicable threshold for applying any standard described in subsections (c) through (g).

(b) Development of prudential standards. (1) In general. The Council’s recommendations under subsection (a) may include—
(A) risk-based capital requirements;
(B) leverage limits;
(C) liquidity requirements;
(D) resolution-plan and credit^*-exposure-report requirements;
(E) concentration limits;
(F) a contingent-capital requirement;
(G) enhanced public disclosures;
(H) short-term debt limits; and
(I) overall risk-management requirements.
(2) Prudential standards for foreign financial companies. When making recommendations about standards under paragraph (1) that would apply to foreign nonbank financial companies supervised by the Board of Governors or foreign-based bank holding companies, the Council must—
(A) give due regard to national treatment and equal competitive opportunity; and
(B) consider the extent to which the foreign company is subject, on a consolidated basis, to home-country standards comparable to those applied to financial companies in the United States.
(3) Considerations. When making recommendations about prudential standards under paragraph (1), the Council must—
(A) consider differences among the companies described in subsection (a), based on—
(i) the factors described in subsections (a) and (b) of section 5323;
(ii) whether the company owns an insured depository institution;
(iii) the company’s nonfinancial activities and affiliations; and
(iv) any other factors the Council considers appropriate;
(B) to the extent possible, ensure that small changes in the factors listed in subsections (a) and (b) of section 5323 do not result in sharp, discontinuous changes in the prudential standards established under section 5365; and
(C) adapt its recommendations as appropriate in light of the company’s predominant line of business, including assets under management or other activities for which particular standards may not be appropriate.

(c) Contingent capital. (1) Study required. The Council must study the feasibility, benefits, costs, and structure of a contingent-capital requirement for the companies described in subsection (a). The study must include—
(A) evaluating how the requirement would improve the safety and soundness of covered companies, promote United States financial stability, and reduce risks to United States taxpayers;
(B) evaluating the characteristics and amounts of contingent capital that should be required;
(C) analyzing possible prudential standards for deciding whether a company’s contingent capital would be converted to equity during financial stress;
(D) evaluating costs to companies, effects on the structure and operation of credit and other financial markets, and other economic effects;
(E) evaluating effects on international competitiveness and the prospects for international coordination; and
(F) recommendations for implementing regulations.
(2) Report. The Council must submit a report to Congress about the study no later than 2 years after July 21, 2010.
(3) Recommendations. (A) In general. After submitting that report, the Council may recommend to the Board of Governors that any covered nonbank financial company^* or bank holding company^* maintain a minimum amount of contingent capital convertible to equity during financial stress. (B) Factors to consider. In making recommendations under this subsection, the Council must consider—
(i) an appropriate transition period for implementing a conversion;
(ii) the factors described in subsection (b)(3);
(iii) capital requirements applying to a covered nonbank financial company or bank holding company and its subsidiaries;
(iv) the results of the required study; and
(v) any other factor the Council considers appropriate.

(d) Resolution-plan and credit-exposure reports. (1) Resolution plan. The Council may recommend to the Board of Governors that each covered nonbank financial company and bank holding company periodically report to the Council, the Board of Governors, and the Corporation about the company’s plan for rapid and orderly resolution if it experiences serious financial distress or fails. (2) Credit-exposure report. The Council may recommend to the Board of Governors requiring each covered company to report periodically to the Council, the Board of Governors, and the Corporation about—
(A) the nature and extent of the company’s credit exposure to other significant nonbank financial companies and significant bank holding companies; and
(B) the nature and extent of those other companies’ credit exposure to it.

(e) Concentration limits. To limit the risks that one company’s failure could pose to covered nonbank financial companies or bank holding companies, the Council may recommend to the Board of Governors that it prescribe standards under section 5365 to limit those risks.

(f) Enhanced public disclosures. The Council may recommend to the Board of Governors that it require covered bank holding companies and covered nonbank financial companies to make periodic public disclosures so that the market can evaluate their risk profile, capital adequacy, and risk-management capabilities.

(g) Short-term debt limits. The Council may recommend to the Board of Governors that it require limits on short-term debt to reduce the risks that an excessive accumulation of that debt could pose to covered bank holding companies, covered nonbank financial companies, or the financial system.