01.11.2015 05:11:35

New Fed Rule Requires Big Banks To Raise $120 Bln In New Debt

(RTTNews) - A new plan proposed by the U.S. Federal Reserve on Friday would require some of the biggest U.S. banks to raise up to $120 billion in new debt, mostly likely in long-term debt.

The Federal Reserve noted that the new rule that would strengthen the ability of the largest domestic and foreign banks operating in the U.S. to withstand another crisis without extraordinary government support or taxpayer assistance.

Federal Reserve Chair Janet Yellen said, "The long-term debt requirement we are proposing today, combined with our other work to improve the resolvability of systemic banking firms, would substantially reduce the risk to taxpayers and the threat to financial stability stemming from the failure of these firms. This is an important step toward ending the market perception that any banking firm is 'too big to fail.'"

The Federal Reserve noted that the proposed rule would apply to domestic firms identified by the Board as global systemically important banks or GSIBs and also to the U.S. operations of foreign GSIBs.

These institutions would be required to meet a new long-term debt requirement and a new "total loss-absorbing capacity," or TLAC, requirement.

The banks will be able to better withstand another crisis by holding sufficient amounts of long-term debt that can be converted to equity during a crisis resolution. It will also provide a source of private capital to support the firms' critical operations during resolution, the Federal Reserve noted.

The requirements are most stringent for JPMorgan Chase & Co. (JPM), followed by Citigroup Inc. (C), Bank of America Corp. (BAC), Goldman Sachs Group Inc. (GS) and Morgan Stanley (MS).

Wells Fargo & Co. (WFC), State Street Corp. (STT) and Bank of New York Mellon Corp. (BK) are also required to build new cushions against losses.

The Federal Reserve governors have approved a draft of the proposal, while public comments on the proposal will be accepted through February 1, 2016. The new requirements need to be met by January 1, 2022.

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Aktien in diesem Artikel

Bank of America Corp. 43,36 -1,98% Bank of America Corp.
Citigroup Inc. 67,65 -1,18% Citigroup Inc.
Goldman Sachs 558,00 -1,33% Goldman Sachs
JPMorgan Chase & Co. 228,25 -1,38% JPMorgan Chase & Co.
Morgan Stanley 122,38 0,03% Morgan Stanley
State Street Corp. 95,48 -0,80% State Street Corp.
Wells Fargo & Co. 66,75 -1,69% Wells Fargo & Co.