FRB Solicits Comments on Long-Term Debt and Total Loss-Absorbing Capacity Proposal

The Board of Governors of the Federal Reserve System ("FRB") requested comments on a proposed rule to "promote financial stability by improving the resolvability and resiliency of large, interconnected U.S. bank holding companies and the U.S. operations of large, interconnected foreign banking organizations" pursuant to Dodd-Frank Act Section 165 ("Enhanced Supervision and Prudential Standards for Nonbank Financial Companies Supervised by the Board of Governors and Certain Bank Holding Companies").

Specifically, the proposed rule would require:

• a U.S. top-tier bank holding company identified by the FRB as a globally systemically important banking ("GSIB") organization ("covered BHC") to maintain an outstanding minimum amount of loss-absorbing instruments, including a minimum amount of unsecured long-term debt and a related buffer;
• the top-tier U.S. intermediate holding company of a global systemically important foreign banking organization with $50 billion or more in U.S. non-branch assets ("covered IHC") to maintain an outstanding minimum amount of intra-group loss-absorbing instruments, including a minimum amount of unsecured long-term debt and a related buffer;
• restrictions on the other liabilities that a covered BHC or IHC may have outstanding; and
• state member banks, bank holding companies and savings and loan holding companies that are subject to the FRB's capital rules to apply a regulatory capital deduction treatment to their investments in unsecured debt issued by covered BHCs.

Comments on the proposal must be submitted by February 1, 2016.