This bill changes how the government handles failing banks by allowing more expensive options if they help prevent big banks from dominating the market. It aims to keep the banking system stable and competitive.
Least Cost Exception Act This bill allows the Federal Deposit Insurance Corporation (FDIC) to waive the least-cost resolution requirement for failed insured depository institutions and use alternative methods of resolution, particularly alternatives that do not involve global systemically important banks (G-SIBs). Under current law, the FDIC must use the resolution method (such as a deposit payoff or the purchase and assumption of a bank’s assets and liabilities) that costs the FDIC's Deposit Insurance Fund the least to implement when an insured depository institution fails. The bill provides an exception to this requirement if the following criteria are met:the alternative method is the least costly of all alternatives that do not involve a G-SIB and that do not exceed the cost of liquidation; the difference in cost between the selected alternative and the cost of a resolution involving a purchase and assumption by a G-SIB is less than a maximum cost as established by rule; if the alternative involves a person purchasing assets or assuming liabilities, that person must pay an assessment to the FDIC; andit is determined that the risks to the fund are outweighed by the benefits of limiting the concentration of U.S. banking under G-SIBs. FDIC must issue a report on any use of the exception established by this bill containing an analysis of the economic impact of cost differences between the selected alternative and the least-cost alternative.