Least Cost Exception Act
- Bill Number
- H.R. 6547
- Origin Chamber
- House
- Congress
- 119th Congress, Session 1
- Policy Area
- Finance and Financial Sector
- Status
- Introduced
- Latest Action
- 2026-02-02: Placed on the Union Calendar, Calendar No. 405.
- Last Updated
- 2026-06-11T23:26:34Z
AI-Generated Summary
Purpose
The "Least Cost Exception Act" (H.R. 6547) aims to modify rules for resolving failing banks to prevent excessive consolidation of power among the largest, most systemically important banks. It provides flexibility to the Federal Deposit Insurance Corporation (FDIC) in handling bank failures, prioritizing reduced concentration in these "too-big-to-fail" institutions over strictly minimizing costs to the government's deposit insurance fund.
Key Provisions
- Exception to Least-Cost Rule: The FDIC can choose a resolution method for a failing insured bank that is not the absolute cheapest option for the Deposit Insurance Fund (DIF, a pool of money that protects depositors' savings up to $250,000 per account) if it avoids selling the bank's assets or transferring its deposits to a Global Systemically Important Banking Organization (G-SIB, a large bank whose failure could threaten the entire financial system).
- Conditions for Using the Exception:
- The chosen alternative must be the least costly among options that do not involve a G-SIB and do not exceed the cost of simply liquidating (shutting down and selling off) the bank.
- The extra cost compared to the cheapest G-SIB-involved option must be limited by criteria set by FDIC rules (to be established within one year of enactment).
- If the alternative involves another entity buying the bank's assets or taking over its deposits, that buyer must pay an assessment to the FDIC over at least five years to cover the cost difference, based on FDIC-established rules including a realistic discount rate (a way to calculate the present value of future payments).
- Decision-Making Process: The FDIC, in consultation with the Federal Reserve Board and the Treasury Secretary, must determine that the benefits of avoiding G-SIB concentration outweigh any added risks to the DIF.
- Reporting Requirement: Within 30 days of using the exception, the FDIC must report to Congress (House Financial Services Committee and Senate Banking Committee) analyzing the economic cost difference between the chosen method and the true least-cost option.
- Rulemaking Timeline: The FDIC must issue rules within one year on cost limits and assessment criteria.
- Definitions:
- Covered Alternative: The cheapest resolution involving a full or near-full sale of assets and assumption of deposits by a G-SIB.
- G-SIB: Defined by existing Federal Reserve regulations as a global systemically important bank holding company and its affiliates.
Significant Changes to Existing Law
- Amends Section 13(c)(4) of the Federal Deposit Insurance Act (FDIA), which currently requires the FDIC to always select the resolution method that imposes the least possible cost on the DIF (the "least-cost resolution" mandate, designed to protect taxpayer funds).
- Adds a new subparagraph (I) allowing discretionary exceptions when avoiding G-SIB concentration is deemed beneficial, while preserving core cost-determination processes from the original law.
- Clarifies that an existing FDIA provision on judicial review (challenging FDIC decisions in court) does not apply to these new exceptions, limiting potential legal challenges to the exception itself.
Potential Impacts
- On Government Agencies: Increases FDIC discretion in bank resolutions, requiring new rulemaking and inter-agency coordination (with Federal Reserve and Treasury). This could lead to more complex decisions but help manage systemic risks from bank mergers.
- On Citizens and the Economy: May protect depositors and the broader economy by curbing the growth of dominant banks, potentially fostering a more diverse banking sector and reducing the risk of future financial crises. However, it could slightly raise short-term costs to the DIF, indirectly affecting banks' insurance premiums (passed on to customers).
- On International Relations: Minimal direct impact, though it could influence global perceptions of U.S. banking stability by signaling efforts to limit the dominance of U.S.-based G-SIBs, which often operate internationally.
Main Stakeholders Affected
- FDIC: Gains flexibility but must justify decisions and create new rules, increasing administrative workload.
- Federal Reserve and Treasury Department: Involved in consultations, affecting their roles in financial stability oversight.
- Banks and Financial Institutions: G-SIBs (e.g., major players like JPMorgan Chase or Bank of America) may face barriers to acquiring failing banks, while smaller or regional banks could benefit from more opportunities to expand without competing against giants. Buyers using the exception must commit to long-term payments.
- Congress: Receives mandatory reports, enhancing oversight of FDIC actions.
- Depositors and Taxpayers: Indirectly affected through DIF costs; the law aims to safeguard long-term financial system health.
- Banking Industry Regulators and Analysts: Must adapt to new criteria for assessing mergers and resolutions.
Notable Legal, Constitutional, or Political Implications
- Legal: Introduces FDIC discretion in cost decisions, potentially reducing opportunities for court challenges under the FDIA's existing limits on judicial review. Cost calculations must follow established FDIA methods, ensuring consistency and fairness.
- Constitutional: Aligns with Congress's authority to regulate banking and commerce (under Article I), promoting financial stability without raising due process concerns, as decisions remain subject to administrative review.
- Political: Reflects bipartisan concerns (sponsored by Republicans and Democrats) about "too-big-to-fail" banks post-2008 crisis, potentially sparking debates on balancing innovation/mergers with antitrust-like measures to prevent economic concentration. Could influence future banking reforms by prioritizing systemic risk over strict fiscal conservatism.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (4)
Rep. Foster, Bill [D-IL-11], Rep. Rose, John W. [R-TN-6], Rep. Moskowitz, Jared [D-FL-23], Rep. Lawler, Michael [R-NY-17]
Recent Actions
- 2026-02-02: Placed on the Union Calendar, Calendar No. 405.
- 2026-02-02: Reported (Amended) by the Committee on Financial Services. H. Rept. 119-474.
- 2026-02-02: Reported (Amended) by the Committee on Financial Services. H. Rept. 119-474.
- 2025-12-17: Ordered to be Reported (Amended) by the Yeas and Nays: 50 - 0.
- 2025-12-17: Committee Consideration and Mark-up Session Held
- 2025-12-16: Committee Consideration and Mark-up Session Held
- 2025-12-10: Referred to the House Committee on Financial Services.
- 2025-12-10: Introduced in House
- 2025-12-10: Introduced in House
Bill Versions
- Least Cost Exception Act — issued 2025-12-10 — PDF (7 pages)
- Least Cost Exception Act — issued 2026-02-02 — PDF (10 pages)