New Act Mandates Deep Dive into Bank Failure Playbook: Regulators Must Study 'Shelf Charters' and Expanded Bidding

The newly proposed Enhancing Bank Resolution Participation Act is essentially Congress telling the banking regulators—specifically the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC)—to hit the pause button and do some serious homework on how they handle bank failures.

This bill doesn't change any rules yet. Instead, it mandates a joint, comprehensive study on two specific tools used when a bank goes under: “shelf charters” and the “modified bidder qualification process.” Think of this as an official post-mortem on recent failures, like those seen in 2023, to see if the regulators missed any opportunities to get a better deal for the public and the financial system.

The Failure Playbook Under the Microscope

So, what are these tools? A shelf charter is basically a pre-approved bank charter kept “on the shelf” by the OCC. When a bank fails, regulators can quickly slot the assets into this ready-made structure, speeding up the sale process. The modified bidder qualification process is the FDIC’s way of allowing non-bank entities—like private equity firms or hedge funds—to bid on a failed bank’s assets, rather than just limiting the sale to other established banks.

Why does this matter to you? The study, required under Section 2, is designed to figure out if greater use of these tools could have expanded the pool of potential buyers and resulted in greater competition during the 2023 failures. More competition usually means a better sale price, which ultimately protects the Deposit Insurance Fund (DIF)—the fund that guarantees your deposits. If the DIF is healthier, taxpayers are less likely to get dragged into a crisis.

What They Have to Report

Within 270 days of the bill becoming law, the OCC and FDIC must deliver a full report to Congress. This isn't just a summary; they need to analyze whether using these tools could have reduced the need for emergency determinations by the Treasury Secretary—the kind of extreme measures we saw used last year to stabilize the system. They also have to identify any existing statutory or regulatory barriers that stopped them from using these tools more effectively, along with concrete recommendations for legislative changes.

In short, this bill is a behind-the-scenes look at how regulators handle the high-stakes mergers and acquisitions that follow a bank collapse. By forcing a detailed review of whether they should be letting more diverse bidders (like non-banks) participate, and whether they can speed up the process (using shelf charters), Congress is trying to figure out if the current system is leaving money on the table. For the average person, this is about making sure the system that protects your savings is using the best possible strategies to keep itself solvent and stable.