Bank Failure Prevention Act of 2025: 90-Day Approval Rush, Ready or Not

The Bank Failure Prevention Act of 2025, as laid out in SEC. 1, aims to streamline the application process for bank holding companies and savings and loan holding companies. The core of the bill, detailed in SEC. 2, revolves around imposing strict deadlines on the Board (likely the Federal Reserve Board) for reviewing applications, with a controversial auto-approval mechanism if those deadlines aren't met.

Time Crunch: 90 Days or Bust

The bill mandates a 90-day window for the Board to either approve or deny applications from the date of initial submission (SEC. 2). This applies regardless of whether the application's record is deemed complete. If the Board misses this deadline, the application is automatically approved. Think of it like applying for a business license, and if the city doesn't get back to you in 90 days, you're automatically good to go, whether they've checked your credentials or not. For a small business owner, this might sound great. For a major bank, it raises some eyebrows.

Information Lockdown

Another key change is how the Board determines if an application is complete. The bill states the Board can only consider information provided by the applicant (SEC. 2). Imagine applying for a job, and the hiring manager can only look at your resume, not call your references. This could limit the Board's ability to fully vet applicants. The bill does allow for a 30-day notification period (extendable by another 30 days for complex cases) where the Board can tell applicants if their record is incomplete and request additional information. But once the applicant responds, the application is considered complete unless the Board finds the response inadequate and notifies the applicant within 30 days.

Real-World Ripple Effects

While the intent might be to speed up the process, the practical implications are worth considering. A rushed review process, coupled with limited information gathering, could mean that potential red flags get missed. For everyday people, this could translate to increased risk in the banking system. If a bank with shaky foundations gets approved because of a technicality, it's the customers and potentially the taxpayers who might end up footing the bill if things go south. On the other hand, for a small community bank trying to expand, this faster process could be a welcome change, allowing them to serve their customers more efficiently. It's a double-edged sword.

The Big Picture

This bill seems to prioritize speed over thoroughness. While reducing bureaucratic delays is generally a good thing, in the context of banking regulation, it's crucial to ensure that proper safeguards are in place. The automatic approval clause, in particular, feels like a potential loophole that could be exploited. The bill essentially ties the hands of regulators, making it harder for them to do their job of protecting the financial system.