- On November 22, Federal bank regulatory agencies announced that they have extended the comment period for their proposed rule to require large banks to maintain long-term debt from November 30, to January 16, 2024. The extension is to allow interested parties more time to analyze the proposal and prepare their comments. Doran Jones discussed this proposal in our series of articles on regulatory expectations for capital adequacy.
- On November 27, Reuters published an article about how Financial Services firms are developing creative ways to free up capital after regulators proposed increases in capital requirements earlier this year. The article focuses on transactions that effectively transfer credit risk to investors through the sale of credit-linked notes. This transfer of risk could reduce the capital that has to be held by banks against potential loan losses. Reuters goes on to point out that these transactions come with risks. “Investors in these deals include lightly-regulated entities like hedge funds, shifting risk to the shadow banking sector. That raises the prospect that regulators will have less visibility and understanding of the dangers that lurk in the financial system. The ability to shed the risk could also encourage banks to get more aggressive on lending, leading to problems later.”
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