[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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