May 2 U.S. regulators are considering requiring
certain large, complex banks to maintain a minimum level of
unsecured long-term debt to ensure that creditors bear any
losses if a firm collapses, the Wall Street Journal reported,
citing people familiar with the discussions.
The Federal Reserve and Federal Deposit Insurance Corp also
see a benefit in having banks issue such debt since it would
reduce reliance on volatile short-term funding markets, the
Journal said. ()
However, such long-term debt could be expensive for banks to
issue since it would have to carry a higher interest rate to
reflect the risk that creditors take in assuming an unsecured
position, according to the paper.