Discount Window Preparedness Act

Key Points

• The bill requires all banks and credit unions to prove they can quickly borrow emergency funds from the Federal Reserve's discount window. Large banks (over $100 billion in assets) must test quarterly, while mid-sized banks ($10-$100 billion) must test at least twice a year.
• The Federal Reserve must modernize its lending operations by building a secure online borrowing platform, automating credit approvals when proper collateral is pledged, and extending service hours until at least 8 p.m. in each U.S. time zone.
• The bill aims to reduce the stigma banks face when borrowing from the Fed by requiring a study on pricing, operational changes, and new reporting methods. Currently, banks avoid the discount window because using it can signal financial weakness, which can worsen crises.
• Smaller banks get special help through simplified paperwork for pledging small business loans as collateral and a new outreach program offering technical assistance, recognizing that community banks often lack the resources of larger institutions.
• Federal regulators must coordinate to standardize how collateral is handled across all 12 Federal Reserve banks and harmonize policies between Federal Home Loan Banks and Federal Reserve banks, making the system more consistent and less confusing for banks.