Regulators propose Large-Bank Resolution Reforms, Approve U.S. Bank Acquisition

Source: American Banker

Bank regulators approved a merger between U.S. Bank and Union-MUFG Friday while simultaneously introducing new standards for large banks' resolution plans.

In a joint statement released Friday, the agencies announced they would seek public comment on a host of potential changes to how some large banks should prepare themselves for potential future failures or bankruptcies.

Potential changes include a requirement that large bank organizations, also known as large regional banks or domestic systemically important banks, hold certain types of long-term debt to absorb losses. The agencies are also considering whether these banks should face modified versions of several standards already applied to larger, global systemically important banks, or G-SIBs.

Fed Vice Chair Lael Brainard said the growth in size and complexity of the banks in the target range — those with between roughly $250 billion and $700 billion — in recent years raises concerns. Because of this, she said, a review of resolution standards is warranted.

The Fed is seeking public feedback on proposed changes such as a requirement that large banks be subjected to some level of "clean" holding company requirements, resolution guidance and disclosure requirements, all of which imposed on GSIBs. It also considers separability requirements, that would have large banks sell off parts of its business to avoid needing to be acquired outright by another firm.