Failing Bank Acquisition Fairness Act
Floor Speech
BREAK IN TRANSCRIPT
Mr. HILL of Arkansas. Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 6556) to prohibit the use of certain concentration limit exceptions with respect to mergers involving a failed bank unless the applicable agency determines such use is necessary to prevent significant economic disruption or significant adverse effects on financial stability, and for other purposes, as amended.
The Clerk read the title of the bill.
The text of the bill is as follows: H.R. 6556
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 ``Failing Bank Acquisition Fairness Act''. SEC. 2. CONCENTRATION LIMIT EXCEPTIONS ONLY AVAILABLE TO AVOID SERIOUS ADVERSE ECONOMIC OR FINANCIAL EFFECTS.
(a) Concentration Limits With Respect to Deposits.--
(1) Federal deposit insurance act.--The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.) is amended--
(A) in section 18(c)(13)--
(i) by amending subparagraph (B) to read as follows:
``(B) Subparagraph (A) shall not apply to an interstate merger transaction if--
``(i) such interstate merger transaction involves 1 or more insured depository institutions in default or in danger of default and the responsible agency determines, based on clear and convincing evidence, that consummation of the proposed interstate merger transaction is necessary to prevent significant economic disruption or significant adverse effects on financial stability, and the Corporation has not received any qualified bid from a company that is not subject to the prohibition in subparagraph (A); or
``(ii) the Corporation provides assistance under section 13 to facilitate such interstate merger transaction and the responsible agency determines, based on clear and convincing evidence, that consummation of the proposed interstate merger transaction is necessary to prevent significant economic disruption or significant adverse effects on financial stability, and the Corporation has not received any qualified bid from a company that is not subject to the prohibition in subparagraph (A).''; and
(ii) in subparagraph (C)--
(I) in clause (i), by striking ``and'' at the end;
(II) in clause (ii), by striking the period at the end and inserting a semicolon; and
(III) by adding at the end the following:
``(iii) the term `qualified bid' means an application, proposed application, or bid from a company where--
``(I) if applicable, the company, any affiliate insured depository institution, and any affiliate depository institution holding company is well capitalized and well managed, as of the date of the application, proposed application, or bid; and
``(II) upon consummation of the transaction, the resulting insured depository institution is well capitalized;
``(iv) the term `well capitalized'--
``(I) with respect to an insured depository institution, has the meaning given such term in section 38(b) (12 U.S.C. 1831o(b));
``(II) with respect to a bank holding company, has the meaning given such term in section 2(o)(1)(B) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(o)(1)(B));
``(III) with respect to a savings and loan holding company, has the meaning given such term in section 238.2 of title 12, Code of Federal Regulations; and
``(IV) with respect to a company that is not an insured depository institution, bank holding company, or savings and loan holding company, means maintaining equity capital that the Corporation determines is commensurate with the capital maintained by an insured depository institution that is well capitalized; and
``(v) the term `well managed' has the meaning given such term in section 2(o)(9) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(o)(9)).''; and
(B) in section 44, by amending subsection (e) to read as follows:
``(e) Exception for Banks in Default or in Danger of Default.--
``(1) General exception.--The responsible agency may, without regard to paragraph (1), (3), (4), or (5) of subsection (b) or paragraph (2), (4), or (5) of subsection (a), approve an application under subsection (a)(1) for approval of a merger transaction if--
``(A) the merger transaction involves 1 or more banks in default or in danger of default; or
``(B) the Corporation provides assistance under section 13(c) to facilitate such merger transaction.
``(2) Concentration limit exception.--The responsible agency may, without regard to subsection (b)(2), approve an application under subsection (a)(1) for approval of a merger transaction if--
``(A) the merger transaction involves 1 or more banks in default or in danger of default and the responsible agency determines, based on clear and convincing evidence, that consummation of the proposed interstate merger transaction is necessary to prevent significant economic disruption or significant adverse effects on financial stability, and the Corporation has not received any qualified bid from another institution that is not subject to the prohibition in subsection (b)(2); or
``(B) the Corporation provides assistance under section 13(c) to facilitate such merger transaction and the responsible agency determines, based on clear and convincing evidence, that consummation of the proposed interstate merger transaction is necessary to prevent significant economic disruption or significant adverse effects on financial stability, and the Corporation has not received any qualified bid from another institution that is not subject to the prohibition in subsection (b)(2).
``(3) Qualified bid defined.--In this subsection, the term `qualified bid' has the meaning given that term in section 18(c)(13)(C).''.
(2) Bank holding company act of 1956.--The Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.) is amended--
(A) in section 3(d), by amending paragraph (5) to read as follows:
``(5) Exception for banks in default or in danger of default.--
``(A) General exception.--The Board may, without regard to subparagraph (B) or (D) of paragraph (1) or paragraph (3), approve an application pursuant to paragraph (1)(A) if--
``(i) the application is for an acquisition of 1 or more banks in default or in danger of default; or
``(ii) the application is for an acquisition with respect to which assistance is provided under section 13(c) of the Federal Deposit Insurance Act.
``(B) Concentration limit exception.--The Board may, without regard to paragraph (2), approve an application pursuant to paragraph (1)(A) if--
``(i) the application is for the acquisition of 1 or more banks in default or in danger of default and the Board determines, based on clear and convincing evidence, that consummation of the proposed acquisition is necessary to prevent significant economic disruption or significant adverse effects on financial stability, and the Corporation has not received any qualified bid from another institution that is not subject to the prohibition in paragraph (2); or
``(ii) the application is for an acquisition with respect to which assistance is provided under section 13(c) of the Federal Deposit Insurance Act and the Board determines, based on clear and convincing evidence, that consummation of the proposed acquisition is necessary to prevent significant economic disruption or significant adverse effects on financial stability, and the Corporation has not received any qualified bid from another institution that is not subject to the prohibition in paragraph (2).
``(C) Qualified bid defined.--In this paragraph, the term `qualified bid' has the meaning given that term in section 18(c)(13)(C) of the Federal Deposit Insurance Act.''; and
(B) in section 4(i)(8), by amending subsection (B) to read as follows:
``(B) Exception.--Subparagraph (A) shall not apply to an acquisition if--
``(i) such acquisition involves an insured depository institution in default or in danger of default and the Board determines, based on clear and convincing evidence, that consummation of the proposed acquisition is necessary to prevent significant economic disruption or significant adverse effects on financial stability, and the Corporation has not received any qualified bid (as defined in section 18(c)(13)(C) of the Federal Deposit Insurance Act) from another institution that is not subject to the prohibition in paragraph (2); or
``(ii) the Federal Deposit Insurance Corporation provides assistance under section 13 of the Federal Deposit Insurance Act to facilitate such acquisition and the Board determines, based on clear and convincing evidence, that consummation of the proposed acquisition is necessary to prevent significant economic disruption or significant adverse effects on financial stability, and the Corporation has not received any qualified bid (as defined in section 18(c)(13)(C) of the Federal Deposit Insurance Act) from another institution that is not subject to the prohibition in paragraph (2).''.
(b) Concentration Limit With Respect to Consolidated Liabilities.--Section 14(c) of the Bank Holding Company Act of 1956 (12 U.S.C. 1852(c)) is amended--
(1) by redesignating paragraphs (1), (2), and (3) as subparagraphs (A), (B), and (C), respectively;
(2) by striking ``With the'' and inserting the following:
``(1) In general.--With the''; and
(3) by adding at the end the following:
``(2) Limitation.--The Board may provide written consent for an acquisition described in paragraph (1)(A) or in paragraph (1)(B) only if the Board determines, based on clear and convincing evidence, that consummation of the proposed acquisition is necessary to prevent significant economic disruption or significant adverse effects on financial stability, and the Corporation has not received any qualified bid (as defined in section 18(c)(13)(C) of the Federal Deposit Insurance Act) from another institution that is not subject to the prohibition in subsection (b).''. SEC. 3. CONGRESSIONAL NOTIFICATION AND JUSTIFICATION FOR WAIVERS.
(a) In General.--Whenever the Board of Governors of the Federal Reserve System, the Comptroller of the Currency, or the Federal Deposit Insurance Corporation waives a concentration limit under section 18(c)(13)(B) or section 44(e) of the Federal Deposit Insurance Act or under section 3(d)(5), section 4(i)(8)(B), or section 14(c)(2) of the Bank Holding Company Act of 1956, in connection with the acquisition of a bank or insured depository institution in default or in danger of default, or in connection with an acquisition with respect to which the Federal Deposit Insurance Corporation provides assistance under section 13 of the Federal Deposit Insurance Act, the waiving agency and the Federal Deposit Insurance Corporation, jointly, shall, not later than 30 days after such waiver, submit a written report to the Committee on Financial Services of the House of Representatives and the Committee on Banking, Housing, and Urban Affairs in the Senate containing--
(1) a justification for the waiver, including an analysis of why it was necessary to prevent significant economic disruption or significant adverse effects on financial stability;
(2) a description of alternative bids or outcomes considered, including efforts to solicit and encourage bids from entities that would not require a waiver;
(3) an explanation of why alternative bids were not selected, if applicable; and
(4) any recommendations for legislative or regulatory changes to improve competition in future insured depository institution resolutions.
(b) Public Disclosure.--The waiving agency submitting a report under subsection (a) and the Federal Deposit Insurance Corporation shall make the report publicly available on their respective websites, subject to redactions for confidential supervisory information and any other information described under section 552(b) of title 5, United States Code. SEC. 4. LIMITATION ON CONSIDERING BAD FAITH BIDS IN LEAST COST DETERMINATION.
Section 13(c)(4) of the Federal Deposit Insurance Act (12 U.S.C. 1823(c)(4)) is amended by adding at the end the following:
``(I) Limitation on considering bad faith bids.--In making a determination under this paragraph of whether an exercise of authority is the least costly to the Deposit Insurance Fund, any application, proposed application, or bid that would result in violation of--
``(i) section 18(c)(13) or 44(b)(2), or
``(ii) section 3(d)(2), 4(i)(8), or 14 of the Bank Holding Company Act of 1956, shall not be considered a possible method for meeting the Corporation's obligation under this section for purposes of subparagraph (A).''. SEC. 5. DISCRETIONARY SURPLUS FUND.
(a) In General.--The dollar amount specified under section 7(a)(3)(A) of the Federal Reserve Act (12 U.S.C. 289(a)(3)(A)) is reduced by $2,000,000.
(b) Effective Date.--The amendment made by subsection (a) shall take effect on September 1, 2036.
Mr. Speaker, I include in the Record the Congressional Budget Office score for this bill.
EFFECTS ON DIRECT SPENDING AND REVENUES OF LEGISLATION CONSIDERED UNDER SUSPENSION OF THE RULES IN THE HOUSE OF REPRESENTATIVES WEEK OF JULY 13, 2026 -------------------------------------------------------------------------------------------------------------------------------------------------------- Additional Effect on Direct Information on Suspension Bill Bill Number Title Spending Effect on Revenues Direct Spending and Text at Revenue Effects doc.house.gov -------------------------------------------------------------------------------------------------------------------------------------------------------- H.R. 6556........................ Failing Bank Increase by at Increase by at Would increase ........... https:// Acquisition Least $500K. Least $500K. direct spending by docs.house.gov/ Fairness Act, as $1 million, billsthisweek/ amended. increase revenues 20260713/ by $1 million, and HR6556_SUSxml.pdf result in no increase in the deficit. --------------------------------------------------------------------------------------------------------------------------------------------------------
BREAK IN TRANSCRIPT
Mr. HILL of Arkansas. Mr. Speaker, I rise in strong support of H.R. 6556, the Failing Bank Acquisition Fairness Act, offered by my friend from Massachusetts.
When a bank fails, regulators need to move fast to protect depositors, preserve confidence in our financial system, consider potential buyers, and minimize disruption to families, businesses, and communities. All of that often takes place in a very short period of time, between Friday at close of business and Monday morning at opening for business. At that same time, those decisions should be made by a process that is fair, transparent, and promotes competition.
Under current law, Federal regulators are generally prohibited from approving a merger or acquisition of a failed or failing bank if the resulting institution would control more than 10 percent or more of deposits nationwide.
However, regulators are allowed to waive these concentration limits under certain circumstances. H.R. 6556 restricts when those concentration limits can be waived to situations in which there are no other qualified bidders for that failed bank and the transaction is necessary to prevent significant economic disruption or adverse effects on U.S. financial stability.
This legislation helps address concentration in the U.S. banking sector and promote a more transparent, competitive, and accountable approach to resolving failing banks. This legislation includes critical guardrails, such as requiring regulators to report to Congress within 30 days of a waiver on why the waiver was granted, why other qualified alternatives were not selected, and any recommendations for legislative or regulatory changes to improve competition for future bank resolutions.
That transparency helps to ensure that these decisions are made in the best interests of depositors; our financial system at large; and, of course, the American people. This is a practical, bipartisan reform that strengthens oversight, promotes competition, and reinforces confidence in the bank resolution process, while preserving regulators' ability to respond to bank failures.
Mr. Speaker, I thank my friend from Massachusetts (Mr. Lynch) for his leadership on this legislation, and I urge my colleagues on both sides of the aisle to support H.R. 6556.
Mr. Speaker, I join my friend from Massachusetts in speaking to the importance of this bill and provide just a couple of minutes of perspective.
If you go back to the 1980s, it was a period of Third World debt crisis, the oil and gas lending crisis, and the real estate lending crisis culminating in the late 1980s with really the collapse of the savings and loan industry across the country from too lax supervision and too lax management of these institutions. In both large banks like the famous Continental Illinois failure in Chicago to some of the large thrifts, the government chose to keep banks open rather than closing them by essentially taking a note back called open bank assistance. It essentially increased the losses to the taxpayers.
After the resolution of the savings and loan bank crisis and all the other related bank failures of the 1980s and very early 1990s, the government said, look, this is out of hand, and we want to enforce a least cost resolution process when a bank fails, meaning we don't want to lose more money after the closing by trying to keep these banks open.
So they offered this ability that whoever paid the highest price, thus the least cost to the taxpayers, was the winner, which is good policy. However, now it is 30 years later, and the largest banks in the country, as outlined by the gentleman from Massachusetts (Mr. Lynch), have a disproportionate ability to bid $1 more and thus be the least cost to the taxpayer--or maybe after the last debate one penny more-- and be the least cost to the taxpayer. That means that it is very hard to compete with them.
What the gentleman from Massachusetts (Mr. Lynch) has proposed is let us have more bidding for those failed banks by crafting a process that is transparent that Congress oversees, Congress outlines the guardrails, where smaller banks could team up with other capital sources and bid for one of those failed banks and end up being in a much more competitive process. What the government gets is a more diversified, more competitive banking system instead of the default winner being one of the big five existing financial institutions.
I thank the gentleman from Massachusetts (Mr. Lynch) for his work on this legislation. I thank Chairman Barr of our Financial Institutions Subcommittee and Ranking Member Waters for bringing our bipartisan team together on the committee in advancing this bill.
Mr. Speaker, I urge Members on both sides of the aisle to vote ``yes'' on this measure.
BREAK IN TRANSCRIPT
Mr. HILL of Arkansas. Mr. Speaker, I urge a ``yes'' vote on the bill. I appreciate the work on both sides of the aisle, and I yield back the balance of my time.
BREAK IN TRANSCRIPT
Source