Agencies Finalize Rule to Reduce the Impact of Large Bank Failures

News Release 2020-137 | October 20, 2020

Joint Release

Board of Governors of the Federal Reserve System
Federal Deposit Insurance Corporation
Office of the Comptroller of the Currency

The federal bank regulatory agencies today finalized a rule to limit the interconnectedness and reduce the impact from failure of the largest banking organizations.  The final rule is substantially similar to the proposal announced last year and complements other measures that the agencies have taken to limit interconnectedness among the largest banking organizations.

U.S. global systemically important bank holding companies, or GSIBs, as well as U.S. intermediate holding companies of foreign GSIBs, are required to issue debt with certain features under the Federal Reserve Board’s “total loss-absorbing capacity,” or TLAC, rule.  That debt could be used to recapitalize the holding company during bankruptcy or resolution if it were to fail.

To discourage the largest banking organizations from purchasing TLAC debt, the final rule prescribes a more stringent regulatory capital treatment for holdings of TLAC debt.  The regulatory capital treatment in the final rule will help to reduce the interconnectedness between the largest banking organizations and, if a GSIB were to fail, reduce the impact on the U.S. financial system from that failure.

This rulemaking also includes a revision to the Federal Reserve Board’s TLAC requirements that will require GSIBs to report publicly their outstanding TLAC debt.

The final rule is effective on April 1, 2021.

Related Link

Media Contacts

Federal Reserve Board
Eric Kollig
(202) 452-2955

FDIC
Julianne Fisher Breitbeil
(202) 898-6895

OCC
Bryan Hubbard
(202) 649-6870

IR Press

Share
Published by
IR Press

Recent Posts

U.S. Department of the Treasury’s CDFI Fund and Federal Housing Finance Agency Collaborate to Bolster CDFI Access to Capital

WASHINGTON—Today, the U.S. Department of the Treasury’s Community Development Financial Institutions Fund (CDFI Fund) and…

2 days ago

Report on U.S. Portfolio Holdings of Foreign Securities at Year-End 2023

Washington – The findings from the annual survey of U.S. portfolio holdings of foreign securities…

3 days ago

READOUT: U.S. Department of the Treasury Hosts Roundtable Discussion on the Financial Sector’s Response to Recent Hurricanes

WASHINGTON – The U.S. Department of the Treasury hosted a roundtable on October 30 with…

3 days ago

READOUT: Sixth Meeting of the Financial Working Group Between the United States and the People’s Republic of China

WASHINGTON – The United States and the People’s Republic of China held the sixth meeting…

3 days ago

Treasury Sanctions Key Members of La Linea, a Group Involved in Trafficking Fentanyl into the United States

WASHINGTON — Today, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned…

3 days ago

TSX Trading Suspended – Chesswood Group Limited (CHW)

TMX Group Limited and its affiliates do not endorse or recommend any securities issued by…

4 days ago