U.S. Sens. Mike Rounds and Doug Jones (D-Ala.), members of the Senate Committee on Banking, Housing and Urban Affairs, today introduced bipartisan legislation to reform the living will submission process. As a result of regulations promulgated under the Dodd-Frank Act, large bank holding companies are required to prepare and submit ‘living wills’ to federal banking regulators that describe their resolution strategy in case of a crisis. The process prescribed by Dodd-Frank for submitting and evaluating living wills, however, has been so slow and complex that it has failed to make our banking system safer and detect true cases of systemic risk.
“Making certain that financial institutions are prepared for times of crisis is vital to protecting customers, taxpayers and the American economy,” said Rounds. “However, the process to review living wills has been burdensome, inconsistent, and it is conducted behind closed doors. Without accountability and transparency in the ‘living will’ review process, we fail to achieve the goal of making our banking system safer. Our commonsense 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.”
“This bipartisan legislation makes common-sense updates to Dodd-Frank that will ultimately help make our banking system safer,” said Jones. “By allowing clear timelines for submission and feedback on living wills, this bill 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. Having received unanimous support in the House of Representatives, I am hopeful the Senate will advance this legislation in the coming months.”
This bill would require financial institutions to submit living wills on a two-year cycle, require federal banking regulators to provide feedback on living will submissions within six months and allow regulators to request additional information related to living wills on an as-needed basis. It also requires regulators to make public the process they use to review living wills.
Companion legislation introduced by Rep. Lee Zeldin (R-N.Y.) passed the House of Representatives 414-0 in January.