H.R. 4771 would require the Federal Reserve to change its policy statement on the allowable level of debt at certain small bank holding companies. The current policy statement applies to bank holding companies with less than $1 billion in total consolidated assets. Under the bill, it would apply to bank holding companies with less than $3 billion in such assets.
Generally, banks with higher levels of debt have a higher probability of failing. The failure of such an institution is likely to increase direct spending by the Federal Deposit Insurance Corporation (FDIC). However, the Federal Reserve may choose not to apply the policy statement to any bank holding company, regardless of asset size, if it determines that such an action is necessary. CBO expects that the Federal Reserve would not allow bank holding companies to take on additional debt under this policy if that debt would jeopardize the solvency of the bank holding company and significantly increase the probability of failure. Further, because the Federal Reserve already supervises those companies, CBO expects that any changes to its administrative costs under the bill would be insignificant. Because increased administrative costs to the Federal Reserve would lower remittances to the Treasury, those costs are recorded in the budget as a decrease in revenues.
Because enacting H.R. 4771 could affect direct spending and revenues, pay-as-you-go procedures apply. However, CBO estimates that any effects would be insignificant for each year.
CBO estimates that enacting H.R. 4771 would not significantly increase net direct spending or on-budget deficits in any of the four consecutive 10-year periods beginning in 2028.
H.R. 4771 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act.