A group of bank regulators appointed by US President Joe Biden are considering new rules for large regional banks, the Wall Street Journal has reported.
The new rules are aimed at providing financial support to regional banks in times of crisis.
As part of the plan, lenders would be required to raise long-term debt to absorb losses in case of their insolvency, the publication said citing three unnamed sources.
They are concerned that, should any one of these banks fail, it could be a difficult task to wind them down due to their large balance sheet.
In a speech earlier this month, Federal Reserve vice chair Michael Barr highlighted that he is keeping a close watch on large regional banks “as they grow and as their significance in the financial system increases.”
Barr said he plans to work with other authorities on plans for banks to wind them down without needing the government’s help for a bailout.
Assessment of risks posed by large regional banks and the steps to address those is in the initial stages.
The development comes as the regulators as they review capital and other requirements for the major US banks.
In the early-September address, Barr indicated that he may take steps to bolster overall bank-capital levels.
“Is capital in the system strong enough,” Barr said. “It is strong. I think the question is, ‘Is it strong enough?’”. As per the report, bankers and trade groups opine that the new rules are unwarranted, and it would ultimately increase costs for consumers and businesses.