U.S. Sen. Mike Rounds (R-SD) on June 14 introduced a bipartisan proposal to reform regulations under the Dodd-Frank Wall Street Reform and Consumer Protection Act that require large bank holding companies to prepare and submit ‘living wills’ to federal banking regulators detailing their potential crisis resolution strategies.
“Making certain that financial institutions are prepared for times of crisis is vital to protecting customers, taxpayers and the American economy,” said Sen. Rounds, who introduced the Financial Institution Living Will Improvement Act of 2018, S. 3070, along with U.S. Sen. Doug Jones (D-AL), who are both members of the U.S. Senate Banking, Housing, and Urban Affairs Committee.
“However, the process to review living wills has been burdensome, inconsistent, and it is conducted behind closed doors,” Sen. Rounds said, adding that a lack of accountability and transparency in the living will review process destabilizes the goal of making the nation’s banking system safer.
“Our common sense legislation follows guidance from Treasury and companion legislation unanimously approved by every member of the House of Representatives to streamline the living will approval process without jeopardizing important protections,” Sen. Rounds said.
Companion legislation, the same-named H.R. 4292, which was introduced by U.S. Rep. Lee Zeldin (R-NY) last November, passed the U.S. House of Representatives 414-0 in January and is under consideration by the Senate Banking, Housing, and Urban Affairs Committee.
According to a statement from Sen. Rounds’ office, the submission and review process for living wills under Dodd-Frank has been so slow and complex that it has failed to make the U.S. banking system safer and able to detect true cases of systemic risk.
The proposed updates to Dodd-Frank under S. 3070 “will help ensure that in the event of financial shock to our economy, banks have an approved plan for how they can be wound down – without requiring a taxpayer bailout,” said Sen. Jones, adding that he’s “hopeful the Senate will advance this legislation in the coming months.”
S. 3070 would require financial institutions to submit living wills on a two-year cycle; would require federal banking regulators to provide feedback within six months; would allow regulators to request additional information on an as-needed basis; and would require regulators to make the review process public, according to a summary provided by Sen. Rounds’ staff.
S. 3070 also is under consideration by the Senate Banking, Housing, and Urban Affairs Committee.