Federal Reserve Pushes Different Paths to SIFI Resolution

In speeches Friday, three Federal Reserve officials laid out visions of the new resolution regime without providing any specifics on key regulatory planks in the FDIC’s single-point-of-entry (SPOE) resolution protocol (see FSM Report RESOLVE15). FRB Gov. Dan Tarullo reiterated that plans are under way for a specific requirement for long-term debt issuance by the largest bank holding companies, noting that rising interest rates will erode current, robust levels absent new rules. Even so, he said, SIFIs could remain under-capitalized for resolution, noting that this could require not only specific amounts of long-term debt, but also a new “internal bail-in debt” structure issued by material operating subsidiaries. Although Mr. Tarullo pressed for short-term debt limits, he did not develop this idea further and noted that it might be necessary also to bar holding companies from engaging in any operating activities and to subject them to strict short-term debt limits.
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