|
|
The rule requiring big banks to issue loss-absorbing debt is central to efforts to prevent more taxpayer bailouts. The Fed’s target is to issue a proposal this year, a Fed official said, but the U.S. regulator has been trying to get other countries on board before implementing the rule.
Michel Barnier, Europe’s Commissioner for Internal Market and Services and a key voice in setting the continent’s banking policy, raised the matter in a private meeting with Ms. Yellen Thursday, according to another official familiar with the meeting.
Mr. Barnier told Ms. Yellen he believes that global regulators should undertake a “quantitative impact study” of the long-term debt rule before agreeing on the details, the second official said.
Mark Van Der Weide, a senior Fed official, said earlier this week that U.S. regulators are hoping to reach a consensus with other countries by November. He said he and Arthur Murton, a senior official at the Federal Deposit Insurance Corp., have “a pretty good mind meld” about what the minimum debt levels ought to be, but there is “much more heterogeneity in the international conversations.”
Mr. Barnier’s position, if adopted by other European officials, could delay an international agreement. Still, the Fed could decide to propose its rule this year and look to make changes later once an international agreement is in place, the Fed official said.
Both banks and regulators have said the rule on long-term debt is crucial to convincing markets that banks are no longer “too big to fail” and able to absorb losses in a severe economic crisis. If a bank were failing, the holders of that debt could re-capitalize a new company, rather than taxpayers providing those funds.