Regulators unveil plans to force regional banks to raise debt in case of failure
US banking regulators plan to require regional banks with at least $100 billion in assets to issue debt in order to protect depositors in the event of further failures.
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Posted 8/29/2023, 2:00:01 PM
cnbc.com
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Regulators have proposed new bank rules that would require lenders with $100 billion in assets to issue more long-term debt to absorb potential losses and prevent systemic worries and collapses.
Large regional banks in the United States may need to issue around $70 billion in fresh debt as part of a proposed rule aimed at strengthening the sector's resilience following the failure of three lenders earlier this year.
US banks are experiencing significant deposit outflows, with total bank deposits plunging by over $70 billion in a week, the lowest levels since May, leading to concerns about the ongoing regional banking crisis; meanwhile, US commercial banks have also suffered significant losses in deposits, with 60% of deposits moving to higher-yielding money market funds, and the balance of unrealized losses on securities at commercial banks rising to $558 billion in Q2; to address these issues, the Federal Reserve has reached an all-time high of $107.8 billion in its banking loan facility to provide funding to distressed banks.