WASHINGTON–Acting Comptroller of the Currency Michael Hsu is expressing concerns around a new cohort of potentially too-large-to-fail financial institutions.
Speaking to an industry group, Hsu described what he sees as a “gap with regards to large regional banks” related to “resolvability,” and indicated he would like to see additional reforms to ensure financial stability in the event a large regional bank should fail.
Specifically, Hsu called for the adoption of a “single-point-of-entry” resolution strategy for such banks, which is the same strategy used in monitoring global systemically important banks. The single-point-of-entry approach means “only the parent holding company is supposed to file for bankruptcy or be taken into receivership; all of the material subsidiaries are expected to continue to operate and function, thus avoiding the chaos of multiple proceedings,” Hsu told the meeting.
Additional Reforms
Additional reforms Hsu said he would also like to see include requiring large regionals to hold “sufficient bail-in-able long-term debt at the parent, and . . . ensuring the separability of major business lines and/or portfolios.”
Hsu does not expect his proposed reforms to be instituted any time soon, noting work needs to be done the Federal Reserve and FDIC.
But in the nearer term, Hsu said the OCC is considering “condition[ing] approval of a large bank merger on actions and credible commitments to achieving [single-point-of-entry], [total loss absorbing capacity], and separability.”
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