Under the plan, large banks would have to hold additional capital if they purchase another bank's "loss-absorbing" debt that is used to contain fallout from a collapse.
Just as a recent law softened Dodd-Frank resolution plan requirements, the head of the Federal Deposit Insurance Corp. announced an effort to ease such rules for depository institutions.
As government officials reconsider how best to wind down large financial institutions, they should ensure the banking agencies have flexibility to act without disrupting markets.
A recent report from the agency settles a long-running debate about whether bankruptcy should replace Dodd-Frank’s “orderly liquidation authority.” The financial system needs both.
The Treasury Department struck a middle ground in recommendations for Dodd-Frank Act wind-down powers, resisting calls to repeal those powers but still addressing concerns that they are too generous to large firms.
The Trump administration on Wednesday refrained from proposing the elimination of authority to clean up failed financial behemoths, but the Treasury Department still wants substantial reforms to the resolution powers.
Treasury Secretary Steven Mnuchin said the Financial Stability Oversight Council will propose SIFI criteria before executing changes, and provided comments about the Volcker Rule, Orderly Liquidation Authority and housing finance.
The Federal Deposit Insurance Corp. has forged a pact with the European Union-based entity that handles failed-bank cleanups to share information and collaborate on planning for cross-border resolutions.
Andreas Dombret, head of regulation at Germany’s central bank, fears entering “the next stage of … an eternal cycle” of crises as countries begin dialing back regulations.
