WASHINGTON--(BUSINESS WIRE)--The Systemic Risk Council has today strongly urged the Federal Reserve Board and the Federal Deposit Insurance Corporation not to proceed with their proposals to relax resolution-planning requirements for the large regional US banks that are not globally systemic.
Over recent months, the Fed and the FDIC have published proposals that, taken together, would relax both resolution-planning and capital and liquidity requirements even though it is currently unclear that all of the affected banking businesses could be resolved in an orderly way. If ever a large regional bank failed, that uncertainty creates the possibility of the authorities resorting to a taxpayer bailout in order to contain disruption to the regional and national economy and losses to the Deposit Insurance Fund.
The SRC is recommending that the banking authorities should seriously consider introducing requirements for regional banks to issue bonds that could be bailed-in wherever there is a material risk that the more traditional (“purchase and assumption”) resolution techniques could not always be applied effectively.
Commenting on the authorities’ package of proposals, SRC Chair Paul Tucker said: “The priority right now should be stepping up preparations to ensure that all large regional banks can be resolved in an orderly way without taxpayer solvency support, not relaxing planning in the hope that things will work out okay.”
About The Systemic Risk Council
The Systemic Risk Council (SRC or Council) is a private sector, non-partisan body of former government officials and financial and legal experts committed to addressing regulatory and structural issues relating to global systemic risk, with a particular focus on the United States and Europe. It has been formed to provide a strong, independent voice for reforms that are necessary to protect the public from financial instability. The goal is to help ensure a financial system in which we can all have confidence.
The SRC was formed by CFA Institute and The Pew Charitable Trusts in June 2012 to monitor and encourage regulatory reform of U.S. capital markets focused on systemic risk. CFA Institute became the sole supporting organization in August 2015. The statements, documents and recommendations of the Council does not necessarily represent the views of the supporting organization.