Washington, D.C. (Jan. 23, 2023) — The Independent Community Bankers of America (ICBA) today urged federal regulators to apply stricter regulatory standards on large regional banks. In a comment letter to the Federal Deposit Insurance Corp. and Federal Reserve Board, ICBA agreed with the agencies that their proposed standards for institutions with more than $250 billion in assets would enhance financial stability by providing a wider range of options to resolve these institutions and avoid government bailouts in the event of financial instability.
“The biggest regional banks are large and complex enough that they should be required to maintain long-term debt with characteristics similar to those required for global systemically important banking organizations,” ICBA President and CEO Rebeca Romero Rainey said today. “This would reduce the chances that the failure of any one or more of these institutions would overwhelm the Deposit Insurance Fund, destabilize our financial system, and require extraordinary intervention by the government — reducing the risks posed by too-big-to-fail institutions.”
The FDIC and Fed in recent years have promulgated rules and guidance to support the orderly resolution of the largest bank holding companies, including requiring these institutions to maintain minimum outstanding amounts of long-term debt and total loss-absorbing capacity, or TLAC. The agencies are seeking public input on whether these requirements for global systemically important banking organizations, or GSIBs, should apply to Category II and III entities — generally those with more than $250 billion in assets.
In response, ICBA said implementing GSIB requirements on Category II and III institutions to provide an extra layer of loss-absorbing capacity would:
Enhance financial stability by providing for a wider range of resolution options for large banks.
Minimize the risks involved with resolving these institutions, including their potential impact on the Deposit Insurance Fund.
Mitigate some of the concerns regarding excessive concentration in the banking system.
Address risks posed by these banks’ increased reliance on large uninsured deposits, international activity, and nonbank operations.
The Independent Community Bankers of America® creates and promotes an environment where community banks flourish. ICBA is dedicated exclusively to representing the interests of the community banking industry and its membership through effective advocacy, best-in-class education, and high-quality products and services.
With nearly 50,000 locations nationwide, community banks constitute roughly 99 percent of all banks, employ nearly 700,000 Americans and are the only physical banking presence in one in three U.S. counties. Holding more than $5.8 trillion in assets, over $4.8 trillion in deposits, and more than $3.5 trillion in loans to consumers, small businesses and the agricultural community, community banks channel local deposits into the Main Streets and neighborhoods they serve, spurring job creation, fostering innovation and fueling their customers’ dreams in communities throughout America. For more information, visit ICBA’s website at www.icba.org.