[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 4799 Introduced in Senate (IS)]
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118th CONGRESS
2d Session
S. 4799
To amend the Federal Reserve Act to mandate discount window testing,
and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
July 25, 2024
Mr. Warner introduced the following bill; which was read twice and
referred to the Committee on Banking, Housing, and Urban Affairs
_______________________________________________________________________
A BILL
To amend the Federal Reserve Act to mandate discount window testing,
and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Discount Window Enhancement Act of
2024''.
SEC. 2. DEMONSTRATION OF ABILITY TO USE THE DISCOUNT WINDOW.
(a) In General.--Section 10B of the Federal Reserve Act (12 U.S.C.
347b) is amended by adding at the end the following:
``(c) Requirement for Depository Institutions To Demonstrate
Ability To Seek Advances.--
``(1) Definitions.--In this subsection:
``(A) Appropriate congressional committees.--The
term `appropriate congressional committees' means the
Committee on Banking, Housing, and Urban Affairs of the
Senate and the Committee on Financial Services of the
House of Representatives.
``(B) Depository institution.--The term `depository
institution' means--
``(i) any institution the deposits of which
are insured under the Federal Deposit Insurance
Act (12 U.S.C. 1811 et seq.); or
``(ii) an insured credit union, as defined
in section 101 of the Federal Credit Union Act
(12 U.S.C. 1752).
``(2) Requirements.--Not later than 1 year after the date
of enactment of this subsection, any depository institution
operating in the United States that is eligible to seek
advances under this section shall, pursuant to regulations
promulgated under this subsection, conduct testing of such
advances and demonstrate, to the satisfaction of the Federal
reserve bank at which the depository institution maintains an
account, or at which another depository institution maintains
an account on its behalf, and to the primary Federal regulator
of the depository institution, that--
``(A) the depository institution has, and maintains
on an ongoing basis, all operational and technical
capacities necessary to borrow advances in a timely and
efficient manner; as demonstrated by such required
testing; and
``(B) the depository institution maintains
collateral with the Federal reserve bank of which it is
a member to support borrowing in accordance with the
requirements of this subsection.
``(3) Regulations.--Not later than 180 days after the date
of enactment of this subsection, the Board, the Federal Deposit
Insurance Corporation, the Office of the Comptroller of the
Currency, and the National Credit Union Administration shall
promulgate final regulations implementing the requirements
under paragraph (2), including:
``(A) Asset thresholds for testing requirements.--
``(i) Larger institutions.--For depository
institutions having assets greater than
$100,000,000,000, mandatory testing shall be
required not less frequently than quarterly, on
a schedule determined by the Board.
``(ii) Smaller institutions.--For
depository institutions having assets not less
than $10,000,000,000 and not greater than
$100,000,000,000, mandatory testing shall be
required not less frequently than semiannually.
``(B) Variation of the schedule, size, and tenor of
advances.--The regulations promulgated under this
paragraph may provide for Federal reserve banks to vary
the size, tenor, and timing of advances required under
this section if the Board determines that--
``(i) such variations would be effective,
particularly with respect to reducing stigma
associated with advances under this section;
and
``(ii) after consultation with affected
depository institutions, such variations would
not result in undue added operational burdens
or costs.
``(C) Incorporation of mandatory testing into
supervision.--The regulations promulgated under this
paragraph shall require that each of the Board, the
Federal Deposit Insurance Corporation, the Office of
the Comptroller of the Currency, and the National
Credit Union Administration--
``(i) incorporate an assessment of the
readiness of each depository institution to
seek advances under this section into the
examination activities of the agency with
regard to liquidity risk management of the
depository institution;
``(ii) provide that the regulations and
supervisory standards of the agency with regard
to liquidity provisioning shall give
appropriate, positive consideration to--
``(I) the ability of a depository
institution to meet the requirements of
the regulations promulgated under this
paragraph; and
``(II) the ability of the
depository institution to access
liquidity through advances under this
section, including the pre-pledged
collateral of the depository
institution.
``(D) Reporting requirements for depository
institutions.--The regulations promulgated under this
paragraph shall require that--
``(i) the management of each depository
institution eligible to seek an advance under
this section shall establish, and the risk
committee or equivalent body of the board of
directors of the depository institution shall
review and approve, not less frequently than
annually, the liquidity risk management plans
and operational readiness of the depository
institution to execute such plans, including
detailed policies and procedures for seeking
advances under this section; and
``(ii) once approved, the management
described in paragraph (A) shall submit to the
Board, the Federal reserve bank of which the
depository institution is a member, and the
primary Federal supervisor of the depository
institution, a report detailing the findings of
the reviews required under that subparagraph.
``(4) Mandatory improvements to operations.--Not later than
180 days after the date of enactment of this subsection, the
Board and the Federal reserve banks shall implement
improvements to advances under this section to ensure that
depository institutions are able to access advances rapidly as
needed, including--
``(A) changes to operations for advances under this
section and Federal Reserve payment services to ensure
that a depository institution eligible to obtain
advances under this section is able to obtain such
advances until at least 8 p.m. each day in each
relevant United States time zone;
``(B) implementing a secure, computer-based online
access platform that depository institutions may use to
obtain such advances, including automating the process
of primary credit approval if appropriate collateral is
pledged;
``(C) standardizing technical specifications and
operational procedures for such advances across all
Federal reserve banks;
``(D) implementing procedures for the consistent
and efficient identification, assignment, and transfer
of security interests in collateral that is pledged to
secure borrowing between any Federal Home Loan Bank and
any Federal reserve bank;
``(E) implementing simplified procedures for
depository institutions to pledge small business loans
as collateral for advances under this section, with
emphasis on simplified documentation for smaller
institutions; and
``(F) creating and funding an outreach program to
provide information and technical assistance to smaller
institutions with regard to accessing advances under
this section.
``(5) Harmonization.--Not later than 270 days after the
date of enactment of this subsection, the Board, in
consultation with the Federal Housing Finance Administration
and the Federal Home Loan Banks, shall promulgate regulations
or guidance simplifying and harmonizing, to the greatest extent
practicable, policies and procedures for the pledging of
collateral for advances under this section, including for the
timely and efficient transfer of collateral between Federal
Home Loan Banks and Federal reserve banks.
``(6) Federal reserve reporting.--
``(A) Review.--Not later than 270 days after the
date of enactment of this subsection, the Board shall
comprehensively review the weekly reporting of its
balance sheet, including advances under this section,
and consider changes to reduce the risk of market
distortions caused by speculative activity regarding
such advances, giving particular consideration to--
``(i) the breakdown of balance sheet data
by district and the manner in which such
reporting may contribute to speculative
activity that threatens the stability of
individual depository institutions; and
``(ii) the effects of disclosure
requirements described in section 11(s).
``(B) Revised reporting methodology.--Not later
than 90 days after the date on which the review
required under subparagraph (A) is completed, the Board
shall revise reporting policies as appropriate to
address the findings of such review, and if necessary
make recommendations to the appropriate congressional
committees regarding potential statutory changes.
``(7) Study.--Not later than 1 year after the date of
enactment of this subsection, the Board, in consultation with
the Comptroller of the Currency, the Federal Deposit Insurance
Corporation, and the National Credit Union Administration,
shall complete a study and submit to the appropriate
congressional committees a report on additional measures that
could be undertaken to reduce the stigma and otherwise improve
the process for advances under this section, including--
``(A) the pricing and other terms of such advances,
especially as they compare to alternative liquidity
sources;
``(B) the costs and benefits of any other relevant
operational or policy changes; and
``(C) recommendations to the appropriate
congressional committees regarding any statutory
changes necessary to reduce the stigma associated with,
and otherwise improve the process for, such
advances.''.
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