Clients have asked us for a comprehensive update on the status of key initiatives aimed at addressing too big to fail in the United States, focusing in particular on regulatory initiatives under way with or without Congressional action on Brown-Vitter (see FSM Report TBTF8). In this report, we assess the most recent developments in this critical arena and forecast likely outcomes. Matters addressed include higher leverage capital rules, surcharges, new resolution protocols, standards governing securities-financing transactions and repos, broader liquidity requirements, and inter-affiliate transaction constraints. Much of this discussion focuses on U.S. and foreign banking organizations – under the biggest and most immediate guns aimed by TBTF reformers. However, as shall be discussed, much in these standards also applies to large non-bank companies in the U.S. first because of the impact on them of changes to bank rules and, over time, the potential imposition of systemic standards to a few of the largest non-bank financial institutions.
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