June 23 U.S. banks have given a proposal to
federal regulators on how to pay for restructuring the country's
too-big-to-fail institutions in the event of a future crisis,
the Wall Street Journal reported, citing people familiar with
The Journal said the proposal, given to the U.S. Federal
Reserve at a private meeting on May 22, is an effort by banks to
pre-empt tougher rules from officials, who believe banks still
could pose a threat to financial stability in a crisis.
According to the plan, the largest financial services
holding companies would maintain a certain amount of debt and
equity that would be used to prop up any failed bank subsidiary
seized by regulators.
Some banks might even be forced to issue expensive long-term
debt, according to the newspaper.
In the presentation, the banks said they each would agree to
hold combined debt and equity equal to 14 percent of their
risk-weighted assets, the Journal said.
Currently, Wells Fargo has a ratio of existing debt
and equity of 14 percent, JPMorgan Chase has 18.4
percent, while Bank of America and Citigroup have
20.2 percent and 22.1 percent each respectively, the Journal
said, citing Goldman Sachs estimates.
The U.S. Federal Reserve could not immediately be reached
for comment by Reuters outside of regular U.S. business hours.
Regulators have not yet responded to the bank's proposal and
could reject it in favor of their own plan. However, they have
favored banks issuing more debt because it can provide liquidity
for a failing bank while government officials replace senior
management and fix problems, the Journal said.