Least Cost Exception Act
Sponsors
Legislative Progress
ReportedMr. Flood introduced the following bill; which was referred to …
Summary
What This Bill Does
The Least Cost Exception Act modifies how the FDIC resolves failing banks. Currently, the FDIC must choose the cheapest option when handling a bank failure. This bill allows the FDIC to pick a more expensive option if doing so prevents the biggest banks from getting even bigger.
Who Benefits and How
Regional and mid-size banks benefit the most - they would have new opportunities to acquire failing banks that previously went to giant institutions like JPMorgan Chase or Bank of America. Community banks also benefit from reduced competitive pressure since the largest banks would face limits on acquiring more assets. This promotes competition in the banking sector overall.
Who Bears the Burden and How
The largest banks (called "global systemically important banks" or G-SIBs) lose acquisition opportunities when smaller banks fail. The Deposit Insurance Fund may face higher short-term costs, though acquiring banks must pay back any cost difference over at least 5 years. The FDIC gains new authority but also new reporting requirements to Congress.
Key Provisions
- Allows the FDIC to deviate from the "least cost resolution" requirement if it prevents G-SIBs from growing larger
- Requires FDIC and Federal Reserve consultation with Treasury before using this exception
- Mandates that acquiring banks pay assessments over 5+ years to cover any additional costs
- Requires the FDIC to report to Congress within 30 days when using this exception
- Directs the FDIC to set maximum cost limits for using this exception within 1 year
Evidence Chain:
This summary is derived from the structured analysis below. See "Detailed Analysis" for per-title beneficiaries/burden bearers with clause-level evidence links.
Primary Purpose
Amends the Federal Deposit Insurance Act to allow the FDIC to deviate from the least cost resolution requirement when resolving failed banks, in order to prevent further concentration of the U.S. banking system in global systemically important banking organizations (G-SIBs).
Policy Domains
Legislative Strategy
"Provide regulatory flexibility to prevent 'too big to fail' banks from becoming even larger through acquisition of failed banks, while maintaining oversight through FDIC/Fed/Treasury consultation and Congressional reporting."
Likely Beneficiaries
- Regional and mid-size banks (can acquire failed banks that would otherwise go to G-SIBs)
- Community banks (reduced competitive pressure from G-SIB expansion)
- Banking sector competition generally
Likely Burden Bearers
- Deposit Insurance Fund (may bear higher short-term costs for non-G-SIB resolutions)
- Global systemically important banks (reduced acquisition opportunities for failed bank assets)
- Acquiring banks (required to pay assessments over 5+ years to cover cost differential)
Bill Structure & Actor Mappings
Who is "The Secretary" in each section?
- "the_board"
- → Board of Governors of the Federal Reserve System
- "the_secretary"
- → Secretary of the Treasury
- "the_corporation"
- → Federal Deposit Insurance Corporation (FDIC)
Key Definitions
Terms defined in this bill
A method of exercising FDIC resolution authority that is the least costly to the Deposit Insurance Fund of all methods involving sale of all or substantially all assets to, and assumption of all or substantially all liabilities by, a global systemically important banking organization.
A global systemically important BHC as defined in 12 CFR 217.402, and any affiliate thereof.
We use a combination of our own taxonomy and classification in addition to large language models to assess meaning and potential beneficiaries. High confidence means strong textual evidence. Always verify with the original bill text.
Learn more about our methodology