Foreign banks including HSBC's and Deutsche Bank are pushing back against the Federal Reserve’s proposals on implementing rules designed to end too-big-to-fail, saying they are burdensome and unfair to the U.S. units of the world’s biggest lenders.
Bloomberg News reports that under the Fed’s proposals, U.S. units of foreign banks affected would need an extra layer of debt available to be wiped out in a crisis, on top of securities qualifying as total loss-absorbing capacity, or TLAC. Both layers of debt deemed “readily available for bail-in” would have to be sold to the parent companies, rather than third-party investors, according to the draft rules, which were released for comment October 30.
The rules are unfair because similar-sized domestic U.S. lenders aren’t subject to the same requirements, banks and lobby groups including Banco Santander and the Institute of International Bankers say in their comments. In addition, the requirement to push losses up to parents runs counter to resolution plans designed to stop contagion.
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