Overview
Title
To specify when the record is complete on certain acquisition applications related to depository institution holding companies, and for other purposes.
ELI5 AI
The "Bank Failure Prevention Act of 2024" is a plan to make sure decisions about certain bank company applications are made quickly, usually within 90 days. If it takes too long, the application is automatically approved, and the people checking the applications are not allowed to use outside information to make a decision.
Summary AI
The bill, known as the "Bank Failure Prevention Act of 2024," aims to establish clear procedures and deadlines for processing acquisition applications related to depository institution holding companies and savings and loan holding companies. It requires the Board to notify applicants within 30 days if their application records are complete or if more information is needed, with the possibility of a 30-day extension for complex cases. Once an applicant responds to a request for additional information, the record is deemed complete, unless the Board identifies deficiencies within 30 days. Importantly, the Board must make a decision on these applications within 90 days, or the application will be automatically approved.
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AnalysisAI
The proposed bill, H.R. 7403, introduced in the House of Representatives, is titled the "Bank Failure Prevention Act of 2024." It seeks to establish specific criteria for when the record is deemed complete on acquisition applications related to depository institution holding companies. The bill proposes amendments to two existing laws: the Bank Holding Company Act of 1956 and the Home Owners' Loan Act. These changes are intended to streamline the process by which the Board of Governors of the Federal Reserve System (often referred to as "the Board") reviews and approves applications in this regulatory area.
General Summary of the Bill
The bill essentially creates a timeline for the Board to determine whether an application for acquisition approval is complete. Once an application is submitted, the Board has 30 days to notify the applicant, either confirming that the application is complete or indicating what additional information is required. Should the application be deemed unusually complex, this period may be extended by an additional 30 days. Importantly, the Board must then decide to grant or deny the application within 90 days of its initial submission, regardless of whether the completeness issues are addressed, or the application is automatically granted.
Significant Issues Highlighted
Several key issues could significantly affect the bill's effectiveness and fairness:
Automatic Approval Risk: If the Board does not act within the stipulated 90 days, applications are automatically granted, even if they are incomplete. This provision might incentivize applicants to strategically delay or give insufficient information, risking a lapse in regulatory oversight.
Limits on Third-Party Information: The proposal restricts the Board from considering third-party information in its decision-making process, which could hinder a thorough assessment of an application's merits and potential impacts.
Lack of Clarity in Provisions: Several terms within the bill, such as "unusually complex" and "materially deficient," remain undefined, which might lead to inconsistent interpretations and applications by the Board.
Ambiguity in Legislative Intent: For a bill named the "Bank Failure Prevention Act," there is little clarity on how the proposed processes directly contribute to preventing bank failures. This lack of specificity raises concerns about the bill's practical implications and potential effectiveness.
Potential Public Impact
Broadly, this bill could have mixed implications for the public. On one hand, defining a clear timeframe for processing applications might expedite decision-making and potentially foster stability within the banking sector. However, the broad allowance for automatic approval without complete application records could lead to regulatory lapses that may eventually impact public trust in financial institutions. If oversight is weakened, there could be a broader risk of financial instability, directly affecting consumers and the economy.
Impact on Specific Stakeholders
Financial Institutions and Holding Companies: These entities might benefit from the predictability and potentially expedited application process. However, less thorough oversight could backfire if systemic risks emerge, affecting their reputation and stability in the long term.
Regulatory Authorities: The Board may face difficulties in consistently applying the bill's provisions due to undefined terms and limitations on information sources. This could strain resources and challenge regulatory efficacy.
Consumers and Communities: The potential of increased financial institution failures, if checks and balances are weakened, could negatively affect consumers, reducing confidence in banking systems and possibly leading to economic repercussions at the community level.
In conclusion, while the bill aims to streamline processes for approving acquisitions related to holding companies, its current form presents risks pertaining to regulatory thoroughness and financial oversight. The balance between efficiency and comprehensive review remains a critical aspect of consideration as this legislation progresses through Congress.
Issues
The bill allows for applications related to depository institution holding companies to be automatically granted if the Board does not act within 90 days, even if the record is incomplete. This could encourage applicants to delay or provide insufficient information in hopes of automatic approval, undermining regulatory intent. (Section 2)
The bill's stipulation that the Board must base its decision only on information provided by the applicant and not on third-party information could significantly limit the comprehensiveness of the application review process and impede decision-making. (Section 2)
The provision in Section 1 lacks clarity and detail about the measures or strategies the 'Bank Failure Prevention Act of 2024' will employ, leaving the potential effectiveness and implications of the legislation ambiguous.
The bill fails to clearly define what constitutes an 'unusually complex' application, which allows for a 30-day extension. This ambiguity could lead to inconsistent application and interpretation by the Board. (Section 2)
The concept of a response being 'materially deficient' is not explicitly defined, which could lead to arbitrary or inconsistent applications of this standard when determining whether an application record is complete. (Section 2)
The absence of cost implications or financial impact analysis in the bill leaves stakeholders uncertain about the potential economic consequences of its implementation. (Section 1)
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Short title Read Opens in new tab
Summary AI
The first section of this act gives it the official name, "Bank Failure Prevention Act of 2024."
2. Complete record on an application Read Opens in new tab
Summary AI
The amendments to the Bank Holding Company Act of 1956 and the Home Owners' Loan Act require the Board to confirm if an application record is complete within 30 days of receipt, with a possible extension of 30 more days for complex cases. Once the Board receives a response for additional information, the record is considered complete unless the response is deficient and a notice is given. The Board must decide on an application within 90 days of its initial submission, or else the application is automatically approved.