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US banks must pay US$2 bn/year to insure against a future market collapse
invite response
2016 Dec 15, 5:47pm 1,047 views 2 comments
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justme
2016 Dec 15, 5:50pm
justme
2016 Dec 15, 5:50pm
>>Half of the eight largest US banks would need to issue roughly US$50 billion in fresh debt to satisfy the new standard,
Issue of equity (stock) makes sense, issue of debt does not. What gives?
The largest US banks will have to pay as much as US$2 billion more a year to insure against a future market collapse, the US Federal Reserve said on Thursday, as it outlined a new rule designed to further protect the financial system.
The rule demands Wall Street holds more debt that could be converted to shareholder equity if a bank is pushed to bankruptcy. Investor-owned stock is the main buffer against a bank failure.
Half of the eight largest US banks would need to issue roughly US$50 billion in fresh debt to satisfy the new standard, known as Total Loss Absorbing Capacity (TLAC), according to Fed estimates.
Taken together, the eight banks’ overall annual funding costs are set to increase by between $680 million and $2 billion, the Fed has said.
Full Article: http://www.scmp.com/business/banking-finance/article/2055028/us-banks-must-pay-us2-bn/year-insure-against-future-market
Also Here: http://in.reuters.com/article/us-usa-fed-capital-idINKBN14421Y
Related Article: https://patrick.net/1285231/financial-stability-board-pledges-to-set-new-too-big-to-fail-rules-by-nov-
#banks #investing #toobigtofail #TLAC