Discount Window Preparedness Act
- Bill Number
- S. 4585
- Origin Chamber
- Senate
- Congress
- 119th Congress, Session 2
- Policy Area
- Finance and Financial Sector
- Status
- Introduced
- Latest Action
- 2026-05-20: Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.
- Last Updated
- 2026-06-17T14:40:33Z
AI-Generated Summary
Purpose The legislation amends the Federal Reserve Act to require eligible depository institutions to regularly test their ability to borrow from the Federal Reserve's discount window. It aims to improve operational readiness, reduce associated stigma, and enhance overall liquidity preparedness for financial institutions.
Key Provisions
- Testing Requirements: Depository institutions must demonstrate ongoing capacity to obtain advances, including maintaining necessary operational systems and pre-pledged collateral.
- Institutions with assets over $100 billion: quarterly testing.
- Institutions with assets between $10 billion and $100 billion: semiannual testing.
- Regulatory Framework: The Federal Reserve Board, FDIC, Office of the Comptroller of the Currency, and National Credit Union Administration must issue rules within 180 days covering testing schedules, variations in advance terms, integration into supervision, and annual management reporting on liquidity plans.
- Operational Improvements: The Federal Reserve must implement changes such as extended borrowing hours until 8 p.m., an online access platform, standardized procedures across districts, simplified collateral transfers with Federal Home Loan Banks, easier pledging of small business loans, and outreach programs for smaller institutions.
- Collateral Harmonization: Regulations to simplify and align collateral pledging rules between the Federal Reserve and Federal Home Loan Banks.
- Reporting Review: The Federal Reserve must review and potentially revise its balance sheet disclosures to limit market speculation.
- Study Requirement: Within one year, the Federal Reserve and other regulators must study and report on additional steps to reduce stigma and improve the discount window process.
Significant Changes to Existing Law This bill adds a new subsection (c) to Section 10B of the Federal Reserve Act, introducing mandatory testing and operational mandates that were not previously required. It shifts from voluntary use of the discount window to required demonstrations of readiness, with new supervisory integration and cross-agency coordination.
Potential Impacts
- On Government Agencies: Requires new regulations, enhanced examination processes for liquidity risk, and operational upgrades by the Federal Reserve and other banking regulators.
- On Citizens and Institutions: Larger banks face more frequent compliance obligations, while smaller institutions may benefit from simplified processes and outreach, potentially improving access to emergency liquidity during stress periods.
- On International Relations: No direct effects identified.
Main Stakeholders Affected
- Depository institutions (insured banks and credit unions) eligible for discount window advances.
- Federal Reserve Board and regional Federal Reserve Banks.
- Primary federal regulators (FDIC, OCC, NCUA).
- Federal Home Loan Banks.
- Appropriate congressional committees (Senate Banking and House Financial Services).
Notable Legal, Constitutional, or Political Implications The bill expands federal regulatory authority over bank operations and liquidity management without altering core constitutional structures. It emphasizes inter-agency collaboration and may prompt future statutory adjustments based on the required study, focusing on reducing market stigma around Federal Reserve borrowing.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (1)
Recent Actions
- 2026-05-20: Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.
- 2026-05-20: Introduced in Senate
Bill Versions
- Discount Window Preparedness Act — issued 2026-05-20 — PDF (10 pages)