The new regulations require US banks with assets of at least $100 billion to issue sufficient long-term bonds to maintain the proportion of such debt to average total assets at 3.5%, or 6% of risk weighted assets. This means that large regional banks in the United States will have to issue an additional $70 billion in bonds. To learn from the lessons of the banking crisis triggered by the collapse of Silicon Valley banks in March this year, US regulators plan to introduce new regulations that force regional banks to issue bonds and strengthen so-called living wills to prevent the public from suffering losses in future bank failures.

On Tuesday, August 29th, Eastern Time, the Federal Deposit Insurance Corporation (FDIC), Federal Reserve, and Office of the Comptroller of the Currency (OCC) jointly issued a notice requiring US banks with assets of at least $100 billion to issue sufficient long-term bonds so that they can absorb capital losses in the event of government takeover or extreme stress situations.

According to the new regulations, the above-mentioned banks must maintain the proportion of long-term debt to average total assets at 3.5%, or 6% of risk weighted assets, whichever is higher. Within three years, the banks must meet this requirement for long-term debt in stages. The plan also states that in order to reduce the risk of contagion, banks are not encouraged to hold debts of other banks.

According to media reports, the debt requirements proposed in the plan are equivalent to applying the standards applicable to international large banks such as Global Systemic Importance Banks (GSIB), applied to regional banks.

There are also media reports that the plan does not imply any new signs of pressure in the banking industry, and represents an attempt by regulators to ensure rapid and smooth dissolution in the event of any bank failure. Moreover, the new plan does not impose this total loss absorption capability (TLAC) requirement on the largest and most complex large banks.

According to media reports, according to the FDIC, if new regulations are implemented according to the plan, large regional banks in the United States must increase their issuance of long-term bonds by about 25%, equivalent to an additional $70 billion in bonds.

Some banking groups have criticized the new regulations.

Greg Baer, CEO of Bank Policy Institute, a public policy research institution in the United States, believes that if new regulations are to be implemented, the FDIC must comprehensively investigate the costs and benefits of compliance for medium-sized banks. The new plan attempts to incorporate regional and medium-sized banks into the regulatory model designed for the world's largest active bank, which is a weakened version of the targeted framework developed by both parties in Congress.

Baer stated that government agencies must fully consider these proposals and account for all costs and benefits. If not carefully considered and adjusted, the new plan may harm the banks they seek to strengthen.

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