Should Banks Get Feedback From Regulators on Their “Living Wills”? (H.R. 4292)

What is H.R. 4292?

(Updated July 31, 2018)

This bill would codify into law current regulatory practices that require large financial institutions to submit resolution plans (aka living wills) to the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve every two years. Living wills describe a bank’s strategy for a rapid and orderly resolution if the bank experiences financial distress or fails. The bill would also require the FDIC and Federal Reserve to provide additional feedback to firms about their living wills, and to publicly disclose the framework they use to assess the living wills.

Argument in favor

This common sense bill would improve and codify into law the process by which banks create living wills to ensure that if they fail they won’t drag the rest of the financial sector down with them. It has bipartisan support and passed out of committee unanimously.

Argument opposed

The existing regulatory process under which banks create living wills doesn’t need to be codified into law. There’s no need for regulators like the FDIC and the Federal Reserve to give banks feedback on their living wills.

Impact

Financial institutions creating living wills; the FDIC and the Federal Reserve.

Cost of H.R. 4292

The CBO estimates that enacting this bill would impose a small administrative cost on the FDIC and Federal Reserve that would have an insignificant net effect on the budget.

Additional Info

In-Depth: Speaking from the House floor in support of his bill to reform the living will process, sponsoring Rep. Lee Zeldin (R-NY) said:

“This legislation would provide needed reforms to the living will submission process, would ensure that impacted financial institutions get needed feedback from their regulators, and would uphold sensible standards to protect the financial system.”

This legislation passed the House Financial Services Committee on a unanimous 60-0 vote and has the support of three cosponsors, including two Democrats and one Republican.

Media:

• House Financial Services Committee Press Release
  
• Committee Report
  
• CBO Cost Estimate