- Key insight: Hill's proposal — which he said is still in early, cross-agency discussions — wouldn't replace high-quality liquid-asset requirements but would treat discount window borrowing capacity as an incentive for banks to maintain "readiness to borrow."
- Expert quote: "If that's the world we're talking about, it's very possible that the central bank is really going to be the only viable source of liquidity," Hill said, referring to scenarios where large banks face deposit outflows that outpace their ability to sell off securities holdings.
- Forward look: The FDIC is in the preliminary stages of consideration for two diverging paths: building more routine, business-as-usual comfort with borrowing, or making it harder for outsiders to detect when a bank steps up to the window.
Federal Deposit Insurance Corp. Chair Travis Hill said on Wednesday that the agency is exploring whether banks' capacity to borrow from the Federal Reserve's discount window should count toward their liquidity requirements.
Hill spoke at the June 17
Hill said incorporating capacity to borrow from the central bank into banks' liquidity framework "would be valuable," pointing to the Silicon Valley Bank failure as an example of how fast deposit outflows can outpace a bank's ability to sell securities.
"The notion that large institutions that could have hundreds of billions of dollars of securities, and that the institutions are going to be able to liquidate those securities to satisfy deposit outflows in mass quantities is not possible," Hill said. "If that's the world we're talking about, it's very possible that the central bank is really going to be the only viable source of liquidity."
He proposed counting some portion of discount window borrowing capacity within a bank's high-quality liquid asset mix — not as a full replacement for HQLA, but as a partial incentive to maintain "readiness to borrow." The FDIC is still in early, cross-agency discussions on this, including with the Fed, according to Hill.
Hill added that the "stigma problem" surrounding discount windows will be a "hard one to solve." The combined factors of banks borrowing in a state of "stress" and the public knowing about it will "always result in state loans," he observed.
"We need to move to a world where there's more comfort or incentive to borrow on a kind of [business as usual] basis, or it needs to be a lot harder for the public to figure out when things borrow from the discount window," Hill said. "There is thinking going on on whether there's additional movement in those directions, but it's going to be a hard problem to solve."
Additionally, the FDIC has reverted to its "legacy" merger review process and is working on a new proposal — expected "sometime over the summer" — addressing statutory factors like competition analysis in rural markets, treatment of nonbank competitors, and a more holistic approach to the financial stability factor, according to Hill.
The current average review time is under 80 days, he said. Hill attributed the slow environment partly to "a lot of buyers and maybe a smaller number of targets," while stressing the agency's focus is on due process before letting "the market go where it goes."
Hill also said on Wednesday that the FDIC is "very supportive" of raising and indexing thresholds, noting that last year the agency
Congress, in passing the
The FDIC chair said the comment period had just closed and the FDIC will be "coordinating closely with the OCC" as it moves toward a final rule, noting the OCC's own proposal drew significant feedback.
"There are a lot of pieces of that that we are thinking through, but the safety and soundness mandate is one that we take seriously," Hill added.
On bank-issued vs. nonbank stablecoins specifically, Hill explained that multiple regulators have jurisdiction over different pieces of the ecosystem, and that Congress required coordination among agencies but not joint rulemaking — meaning standards should be broadly similar but implementation could vary. He said the OCC has authority over nonbank stablecoins above certain state supervisory thresholds, while the FDIC's
Tokenization is another issue the FDIC has "been thinking a lot about," Hill said, noting his agency's GENIUS Act proposal asked questions about how to regulate tokenized deposits. He described "a tremendous amount of research" and experimentation happening, particularly among the largest banks, citing potential benefits in liquidity management, collateral management, and faster, more conditional movement of funds.
"I think to some extent, though, this is just the way the world is moving, and there are a lot of benefits to it," Hill said. "We view the risks as things that need to be managed, as opposed to barriers."
Under the current system, Hill flagged that failed banks are typically resolved over a weekend, and a shift to a 24/7/365 market will "be a different world" that requires the FDIC to adapt its processes.
Hill said Congress remains interested in
He favors creating a new category of deposits eligible for a higher threshold — citing non-interest-bearing transaction accounts or business accounts as examples — over a flat increase to the standard threshold, calling it a more efficient way to address run risk and reduce fragility in the banking system.
Third-party relationships between banks and fintechs are "vital to the health and vitality of the banking system," Hill said. He added the FDIC is working with peer agencies on revisions to the 2023 third-party risk management guidance, which he characterized as having been "overly prescriptive," moving toward something "more principles based and more risk based."
He was critical of the 2023–2024 approach of issuing consent orders, calling it "generally a problematic approach," and said the agency favors more transparency about supervisory expectations rather than forcing institutions to infer standards from enforcement actions, some of which are nonpublic.
The FDIC has been considering a "potential standard-setting organization" — described as a public-private body — to streamline due diligence for small banks partnering with fintechs, reducing duplicative work across institutions, according to Hill.
Pushing back on the idea that the U.S. is pulling away from Basel, he said there was "a concerted effort to implement the international Basel agreement," and that international coordination has real value, especially for capital requirements affecting globally active banks. But he said any international agreement "needs to ... work here in the United States" and that the U.S. has deviated from the international framework where it "just didn't work for the domestic market" — citing operational risk as one example.
He also argued there has been "mission creep" from the Basel Committee, and that on lower-value-add topics, "it's fine for each jurisdiction to just do what makes the most sense" for itself.
Hill said it's "a little too soon to tell" how well-calibrated the capital proposal is, since the FDIC is still collecting comments. He framed the goal as balancing safety-and-soundness mandates against keeping banks competitive and able to support economic growth, saying the proposal "did a reasonably good job of striking that balance" but remains open to feedback before a final rule.
"We are trying to balance our safety and soundness and resilience mandates with a desire for banks to continue to be competitive and be able to drive economic growth," Hill said. "I think the proposals did a reasonably good job of striking that balance, but again, we're open to feedback."
