FDIC unveils plan to ramp up debt, resolution requirements for big US banks
By Pete Schroeder
WASHINGTON (Reuters) -A top U.S. banking regulator Tuesday unveiled a slate of proposed rules to ensure regional banks can be safely dissolved in times of stress, including one that requires them to issue billions more in debt as a cushion against potential losses.
The Federal Deposit Insurance Corporation (FDIC) was set to vote on five proposals later in the day aimed at ensuring banks with over $100 billion in assets are prepared for their own potential failures, and can be taken apart smoothly and quickly.
Among the proposals laid out by FDIC staff is one that will require banks of that size to issue more long-term debt, which could provide more funds to offset potential losses, reassure depositors, and encourage investors to closely monitor a bank's operations, according to FDIC Chairman Martin Gruenberg.
That proposal would mean banks have to raise their long-term debt issuance by roughly 25%, or $70 billion, according to the FDIC. The agency said firms would have three years from the rule's adoption to meet the new standard.
Specifically, the level required of each bank will be based on percentages of each firm's risk-weighted assets, total assets, or total leverage, depending on what yields the highest number.
Regional banks like PNC Financial Services Group Inc (NYSE:PNC), Fifth Third Bancorp (NASDAQ:FITB), and Citizens Financial (NYSE:CFG) Group Inc are among those that would fall under the new, tougher rules.
The push comes in the aftermath of a tumultuous spring that saw three banks fail, forcing regulators to scramble to backstop depositors and tap billions of dollars from the FDIC's insurance fund to sell off pieces of the firms to willing buyers.
«The failure of three large regional banks
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