ICBA announced its support for an interagency proposal to require banks with $100 billion or more in assets to maintain minimum levels of externally issued long-term debt.
Background: Under the proposal, the newly defined category II, III, and IV large banking organizations would join category I systemically important financial institutions in holding sufficient levels of long-term debt issued to third parties, which regulators could use to resolve large institutions in the event of insolvency.
ICBA Comments: In a comment letter, ICBA said:
The proposal would help protect U.S. taxpayers and community banks from the failures of the too-big-to-fail megabanks by allowing the capital markets to absorb the risk.
The market pricing of these instruments could help identify potential safety and soundness stresses within these institutions, incentivizing large bank management teams to maintain high-quality regulatory capital.
The proposal increases the likelihood that community banks could successfully bid on the assets or liabilities of a failed large bank, because the proposal offers management teams more time to thoroughly evaluate risks and opportunities.
ICBA Announcement: “As ICBA has long said, applying stricter capital, debt, and resolution standards on the largest banks will help address the nation’s too-big-to-fail problem while allowing community banks to continue meeting the needs of local customers and communities,” ICBA President and CEO Rebeca Romero Rainey said in a national news release.
