Americans for Financial Reform Education Fund raised concerns over weakening resolution planning requirements intended to prepare large bank holding companies for an orderly resolution in conventional bankruptcy without risk to financial stability and without any reliance on extraordinary public support of the failed bank or its counterparties.
Americans for Financial Reform Education Fund sent a letter to banking regulators opposing a proposal that would make the resolution planning process substantially less stringent than it currently is, and raising concerns over the safety and soundness of individual banks and the effect on U.S. financial stability.
“ILC charters exploit a loophole in federal banking laws to gain access to the federal deposit-insurance safety net while avoiding critical federal supervision and regulation. ILCs therefore pose unique risks to the financial system… If these applications are granted, [it] will send a clear signal to the marketplace that the FDIC intends once again to approve ILC deposit insurance applications, potentially unleashing a dangerous avalanche of new applications.”
“AFR sent a letter to banking regulators today concerning their review of bank resolution plans. The Dodd-Frank Act requires regulators to review these plans to ensure that major banks are no longer ‘too big to fail’ – that they can go through a conventional (Chapter 11) private bankruptcy in an orderly manner, without creating substantial economic disruption. “
AFR is calling on financial regulators to provide the public with more transparency on the implementation of the Volcker Rule, the historic prohibition on bank proprietary trading incorporated into the Dodd-Frank Act.
“Mandatory margin requires participants in the swaps market to take full account of the risks of their derivatives transactions and provide some level of advance provisioning for such risks. The availability of properly segregated margin is clearly of enormous value in case of the default of a swaps counterparty.”
AFR wrote to the banking regulators to urge them to strengthen the new supplementary leverage ratio proposed for large U.S. banks.
AFR sent a letter to regulators emphasizing the lessons from the Senate Permanent Subcommittee on Investigations (PSI) report on the London Whale.
More specificity and disclosure are needed in the big banks’ “living wills.”
AFR urges regulators to strengthen their original proposal and not to be swayed by exaggerated industry concerns about market liquidity.