WASHINGTON— The Independent Community Bankers of America (ICBA) is urging 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 said it 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. “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.”
Input Sought
The association noted 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.
‘Extra Layer’
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
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