S. 4585

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 4585 Introduced in Senate (IS)]

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119th CONGRESS
2d Session
S. 4585

To amend the Federal Reserve Act to mandate discount window testing, 
and for other purposes.

_______________________________________________________________________

IN THE SENATE OF THE UNITED STATES

May 20, 2026

Mr. Warner (for himself and Mr. Kennedy) introduced the following bill; 
which was read twice and referred to the Committee on Banking, Housing, 
and Urban Affairs

_______________________________________________________________________

A BILL

To amend the Federal Reserve Act to mandate discount window testing, 
and for other purposes.

Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Discount Window Preparedness Act''.

SEC. 2. DEMONSTRATION OF ABILITY TO USE THE DISCOUNT WINDOW.

(a) In General.--Section 10B of the Federal Reserve Act (12 U.S.C. 
347b) is amended by adding at the end the following:
``(c) Requirement for Depository Institutions To Demonstrate 
Ability To Seek Advances.--
``(1) Definitions.--In this subsection:
``(A) Appropriate congressional committees.--The 
term `appropriate congressional committees' means the 
Committee on Banking, Housing, and Urban Affairs of the 
Senate and the Committee on Financial Services of the 
House of Representatives.
``(B) Depository institution.--The term `depository 
institution' means--
``(i) any institution the deposits of which 
are insured under the Federal Deposit Insurance 
Act (12 U.S.C. 1811 et seq.); or
``(ii) an insured credit union, as defined 
in section 101 of the Federal Credit Union Act 
(12 U.S.C. 1752).
``(2) Requirements.--Not later than 1 year after the date 
of enactment of this subsection, any depository institution 
operating in the United States that is eligible to seek 
advances under this section shall, pursuant to regulations 
promulgated under this subsection, conduct testing of such 
advances and demonstrate, to the satisfaction of the Federal 
reserve bank at which the depository institution maintains an 
account, or at which another depository institution maintains 
an account on its behalf, and to the primary Federal regulator 
of the depository institution, that--
``(A) the depository institution has, and maintains 
on an ongoing basis, all operational and technical 
capacities necessary to borrow advances in a timely and 
efficient manner; as demonstrated by such required 
testing; and
``(B) the depository institution maintains 
collateral with the Federal reserve bank of which it is 
a member to support borrowing in accordance with the 
requirements of this subsection.
``(3) Regulations.--Not later than 180 days after the date 
of enactment of this subsection, the Board, the Federal Deposit 
Insurance Corporation, the Office of the Comptroller of the 
Currency, and the National Credit Union Administration shall 
promulgate final regulations implementing the requirements 
under paragraph (2), including:
``(A) Asset thresholds for testing requirements.--
``(i) Larger institutions.--For depository 
institutions having assets greater than 
$100,000,000,000, mandatory testing shall be 
required not less frequently than quarterly, on 
a schedule determined by the Board.
``(ii) Smaller institutions.--For 
depository institutions having assets not less 
than $10,000,000,000 and not greater than 
$100,000,000,000, mandatory testing shall be 
required not less frequently than semiannually.
``(B) Variation of the schedule, size, and tenor of 
advances.--The regulations promulgated under this 
paragraph may provide for Federal reserve banks to vary 
the size, tenor, and timing of advances required under 
this section if the Board determines that--
``(i) such variations would be effective, 
particularly with respect to reducing stigma 
associated with advances under this section; 
and
``(ii) after consultation with affected 
depository institutions, such variations would 
not result in undue added operational burdens 
or costs.
``(C) Incorporation of mandatory testing into 
supervision.--The regulations promulgated under this 
paragraph shall require that each of the Board, the 
Federal Deposit Insurance Corporation, the Office of 
the Comptroller of the Currency, and the National 
Credit Union Administration--
``(i) incorporate an assessment of the 
readiness of each depository institution to 
seek advances under this section into the 
examination activities of the agency with 
regard to liquidity risk management of the 
depository institution;
``(ii) provide that the regulations and 
supervisory standards of the agency with regard 
to liquidity provisioning shall give 
appropriate, positive consideration to--
``(I) the ability of a depository 
institution to meet the requirements of 
the regulations promulgated under this 
paragraph; and
``(II) the ability of the 
depository institution to access 
liquidity through advances under this 
section, including the pre-pledged 
collateral of the depository 
institution.
``(D) Reporting requirements for depository 
institutions.--The regulations promulgated under this 
paragraph shall require that--
``(i) the management of each depository 
institution eligible to seek an advance under 
this section shall establish, and the risk 
committee or equivalent body of the board of 
directors of the depository institution shall 
review and approve, not less frequently than 
annually, the liquidity risk management plans 
and operational readiness of the depository 
institution to execute such plans, including 
detailed policies and procedures for seeking 
advances under this section; and
``(ii) once approved, the management 
described in paragraph (A) shall submit to the 
Board, the Federal reserve bank of which the 
depository institution is a member, and the 
primary Federal supervisor of the depository 
institution, a report detailing the findings of 
the reviews required under that subparagraph.
``(4) Mandatory improvements to operations.--Not later than 
180 days after the date of enactment of this subsection, the 
Board and the Federal reserve banks shall implement 
improvements to advances under this section to ensure that 
depository institutions are able to access advances rapidly as 
needed, including--
``(A) changes to operations for advances under this 
section and Federal Reserve payment services to ensure 
that a depository institution eligible to obtain 
advances under this section is able to obtain such 
advances until at least 8 p.m. each day in each 
relevant United States time zone;
``(B) implementing a secure, computer-based online 
access platform that depository institutions may use to 
obtain such advances, including automating the process 
of primary credit approval if appropriate collateral is 
pledged;
``(C) standardizing technical specifications and 
operational procedures for such advances across all 
Federal reserve banks;
``(D) implementing procedures for the consistent 
and efficient identification, assignment, and transfer 
of security interests in collateral that is pledged to 
secure borrowing between any Federal Home Loan Bank and 
any Federal reserve bank;
``(E) implementing simplified procedures for 
depository institutions to pledge small business loans 
as collateral for advances under this section, with 
emphasis on simplified documentation for smaller 
institutions; and
``(F) creating and funding an outreach program to 
provide information and technical assistance to smaller 
institutions with regard to accessing advances under 
this section.
``(5) Harmonization.--Not later than 270 days after the 
date of enactment of this subsection, the Board, in 
consultation with the Federal Housing Finance Administration 
and the Federal Home Loan Banks, shall promulgate regulations 
or guidance simplifying and harmonizing, to the greatest extent 
practicable, policies and procedures for the pledging of 
collateral for advances under this section, including for the 
timely and efficient transfer of collateral between Federal 
Home Loan Banks and Federal reserve banks.
``(6) Federal reserve reporting.--
``(A) Review.--Not later than 270 days after the 
date of enactment of this subsection, the Board shall 
comprehensively review the weekly reporting of its 
balance sheet, including advances under this section, 
and consider changes to reduce the risk of market 
distortions caused by speculative activity regarding 
such advances, giving particular consideration to--
``(i) the breakdown of balance sheet data 
by district and the manner in which such 
reporting may contribute to speculative 
activity that threatens the stability of 
individual depository institutions; and
``(ii) the effects of disclosure 
requirements described in section 11(s).
``(B) Revised reporting methodology.--Not later 
than 90 days after the date on which the review 
required under subparagraph (A) is completed, the Board 
shall revise reporting policies as appropriate to 
address the findings of such review, and if necessary 
make recommendations to the appropriate congressional 
committees regarding potential statutory changes.
``(7) Study.--Not later than 1 year after the date of 
enactment of this subsection, the Board, in consultation with 
the Comptroller of the Currency, the Federal Deposit Insurance 
Corporation, and the National Credit Union Administration, 
shall complete a study and submit to the appropriate 
congressional committees a report on additional measures that 
could be undertaken to reduce the stigma and otherwise improve 
the process for advances under this section, including--
``(A) the pricing and other terms of such advances, 
especially as they compare to alternative liquidity 
sources;
``(B) the costs and benefits of any other relevant 
operational or policy changes; and
``(C) recommendations to the appropriate 
congressional committees regarding any statutory 
changes necessary to reduce the stigma associated with, 
and otherwise improve the process for, such 
advances.''.
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