Agencies Propose Heavy Capital Requirement on Holdings of Large Bank Debt

As part of their efforts to mitigate financial stability risks associated with connections among the largest banks, the federal banking agencies today proposed a rule that would discourage the largest banks from purchasing large amounts of total loss-absorbing capacity debt issued by other large banks.

The proposal would require the largest bank holding companies to hold additional capital against substantial holdings of TLAC debt. It would apply to global systemically important bank holding companies and banking organizations subject to the Basel III advanced approaches. Comments on the proposal are due 60 days after it is published in the Federal Register. For more information, contact ABA’s Hugh Carney or Hu Benton.