WASHINGTON Feb 13 U.S. and European regulators
will plan out how to cope with any future failure of a global
bank, a U.S. official will say at a congressional hearing to
assess regulators' progress on overhauling Wall Street
A U.S. and European Commission working group will meet later
this month to discuss how to wind down massive firms as part of
ongoing efforts to prevent governments from having to bail out
banks, Federal Deposit Insurance Corp (FDIC) Chairman Martin
Gruenberg will say on Thursday.
The top U.S. financial regulators will line up for the
hearing before a Senate committee to explain their 2013 agendas
and update lawmakers on their efforts to crack down on Wall
Street, according to prepared testimony from the regulators that
was viewed by Reuters.
The 2010 Dodd-Frank oversight law charged financial
regulatory agencies with writing a raft of new rules in an
effort to prevent another meltdown like the 2007-2009 U.S.
On the agenda for Thursday's hearing are issues such as
winding down massive failed banks, progress on controversial new
reforms such as the Volcker rule, and requests for more funds to
carry out the new authorities.
Dodd-Frank gave the FDIC, which oversees state-chartered
banks, the job of planning for when a massive bank fails and
cannot be resolved through bankruptcy. The FDIC is cooperating
with the United Kingdom in a similar group, Gruenberg will say.
The FDIC has sketched out its plans for taking apart such a
bank, but has said more work is needed to get all of the global
regulators on the same page about what to do in a crisis.
The FDIC and the Federal Reserve are considering a new
requirement that the biggest banks hold a certain amount of
long-term, unsecured debt, Governor Daniel Tarullo of the
Federal Reserve plans to say.
That would ensure that when a bank goes into the resolution
process, there would be enough long-term debt holders to bear
the losses, he will say.
He also plans to tell lawmakers that bank regulators will
propose a risk-based capital surcharge that would apply to the
biggest banks and rules to implement new liquidity requirements
that are part of a global agreement known as Basel III.
Gary Gensler, who heads the Commodity Futures Trading
Commission (CFTC), the top U.S. derivatives regulator, expressed
concern banks were advising hedge funds to conduct deals from
off-shore locations to dodge U.S. rules.
"The CFTC is working to ensure that this idea does not
prevail and develop into a practice that leaves the American
public at risk," Gensler said in his prepared testimony.
He also said that the agency would call for a public hearing
on Libor, the interest rate benchmark at the heart of a global
rate-rigging scandal, as international regulators think about
alternatives for the widely-used rate.
He said the CFTC would host a meeting on Feb. 26, after a
similar event in London on Feb. 20.
Regulators likely will be pressed to explain their efforts
to implement tough new capital requirements that were also
called for by the Basel III international agreement.
Senate Banking Committee Chairman Tim Johnson, a Democrat,
and top committee Republican Mike Crapo wrote to regulators on
Wednesday asking them to consider the impact of new capital
rules on community banks and insurance companies.
"In setting the new capital rules for the United States
institutions, your agencies face a formidable task to carefully
tailor the new rules to the unique risks of institutions while
neither hampering lending nor undermining the strength of our
financial system," the two wrote.
Lawmakers also are expected to debate the future of the
Consumer Financial Protection Bureau, which has come under fire
from Republicans who want to change its structure. Three
Democratic senators on the committee strongly defended the
bureau on Wednesday.
The other speakers at the hearing are Mary Miller, the
Treasury Department's under secretary for domestic finance,
Comptroller of the Currency Tom Curry, Securities and Exchange
Commission Chairman Elisse Walter and consumer bureau Director