Congressmen Flood & Nickel with Senator Lummis Introduce Bipartisan Resolution to Repeal SAB 121
WASHINGTON, D.C. – Today, U.S. Congressmen Mike Flood (R-NE) and Wiley Nickel (D-NC) introduced a resolution under the Congressional Review Act (CRA) to repeal the U.S. Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin (SAB) 121. U.S. Senator Cynthia Lummis (R-WY) has introduced a companion measure in the Senate. SAB 121 prevents banks from providing custodial services to digital assets investors by requiring them to keep those assets on-balance sheet.
“The Government Accountability Office has spoken. The SEC’s Staff Accounting Bulletin 121 (SAB 121) goes beyond the scope of an accounting bulletin and is effectively a rule,” said Congressman Mike Flood. “The SEC issued SAB 121 without conferring with prudential regulators despite the accounting standard’s effects on financial institutions’ treatment of custodial assets, and the SEC issued SAB 121 without going through the notice-and-comment process. In the face of overreach by a regulator, it is the role of Congress to serve as a check. I am proud to jointly introduce a bipartisan resolution of congressional disapproval with Senator Lummis and Congressman Nickel to fulfill that role.”
“Gary Gensler and the Security and Exchange Commission continue to overstep their authority, and it's time for Congress to weigh in on Staff Accounting Bulletin No. 121,” said Congressman Wiley Nickel. “I’m proud to lead this bipartisan, bicameral effort with Senator Lummis and Congressman Flood pushing back against the SEC’s untenable approach on digital assets. I’ll continue to work in a bipartisan way to ensure that banks can safely hold digital assets for investors.”
“SAB 121 has massive implications, and the SEC should have received feedback on it from the federal banking regulators and the public before implementing this legally binding directive,” said Senator Cynthia Lummis. “I have serious concerns over the impact of this bulletin on consumer protection and ensuring well-regulated financial institutions are able to provide safe custody for Americans’ hard-earned financial assets.”
A copy of the resolution introduced under the CRA can be found here.
Congressmen Flood and Nickel are also lead sponsors of the Uniform Treatment of Custodial Assets Act, another means of rescinding the SEC’s disastrous SAB 121 and ensure that assets custodied by banks, credit unions and trusts are kept off-balance sheet in line with longstanding practice. The full bill can be found here.
WHAT THEY ARE SAYING ABOUT THE PROPOSED SAB 121 REPEAL
American Bankers Association: “We applaud Senator Lummis and Representatives Flood and Nickel for their leadership on this important issue. The SEC’s Staff Accounting Bulletin 121 represents a significant departure from longstanding accounting treatment for custodied assets and threatens the banking industry’s ability to provide its customers with safe and sound custody of digital assets. Limiting banks’ ability to offer these services leaves consumers with few well-regulated, trusted options for their digital asset portfolios and ultimately exposes them to risk.”
Bank Policy Institute: “The Bank Policy Institute thanks Senator Lummis and Representatives Flood and Nickel for their work in opposing the Security and Exchange Commissions’ Staff Accounting Bulletin 121. BPI’s initial concerns that this would preclude highly regulated U.S. banking organizations from providing a custodial solution for digital assets at scale have been confirmed. The result is that digital asset custodial services are currently offered by a multitude of non-banking organizations, keeping the activity outside the prudential perimeter and outside of banks with comprehensive and robust risk management practices, thus increasing risks for customers.”
Financial Services Forum: “The nation’s largest banks are subject to the highest level of prudential requirements. Unfortunately, significant capital requirements contained in the SEC’s SAB 121 have effectively precluded banks today from being able to safely offer digital asset custody services. Today’s joint resolution would rescind this unnecessary and unwise policy and allow U.S. banks to offer these services in a highly regulated and safe and sound manner. The Financial Services Forum commends Senator Cynthia Lummis and Representatives Mike Flood and Wiley Nickel for introducing this resolution and for their leadership on this important issue.”
SIFMA (Securities Industry and Financial Markets Association): “SIFMA thanks Senator Lummis, Congressman Flood and others in Congress for their efforts to address Staff Accounting Bulletin No. 121 (“SAB 121”), which the SEC issued without stakeholder engagement or consultation with the prudential regulators to fundamentally change the way financial institutions are expected to account for the custody of digital assets. SAB 121’s requirement for balance sheet recognition deviates from current accounting treatment for traditional assets held in custody, which are not required to be recorded on a firm’s balance sheet. Because of its impact on bank capital and liquidity ratios, SAB 121 has disincentivized banks from providing custodial services for digital assets. We do not disagree with the need for regulatory oversight, but the process should be deliberate and comprehensive to avoid unintended knock-on effects. Banks are already subject to extensive prudential rules and oversight and have deep expertise in providing safe custody of a wide variety of assets. SIFMA has consistently supported congressional action to bring attention to this issue and restore the ability for banks to provide such services for their clients, and we thank Senator Lummis and Congressman Flood for their leadership today.”