Biggest regional banks may face new rules on financial cushions - report

The PNC bank logo on the side of a building, Pittsburgh, Pennsylvania, USA

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A group of bank regulators are considering new rules for larger regional banks that would require larger capital buffers in case of crises. Measures under consideration include requiring large regional financial institutions to raise long-term debt that could help absorb losses if they become insolvent, the Wall Street Journal reported, citing three people familiar with the matter.

In essence, the President Biden-appointed regulators are looking at applying to some regional firms a slimmed-down version of requirements that only apply to the largest U.S. banks currently, they said. The discussion emerged from concerns that the growth of the U.S.'s largest regional banks, such as U.S. Bancorp (NYSE:USB), Truist Financial (NYSE:TFC), and PNC Financial (NYSE:PNC), may be introducing new risks to the financial system. Shares of all three banks were unchanged in Monday premarket trading as of 8:01 AM ET.

Banks and their trade groups, though, say such rules aren't needed and would push banks that typically fund their operations through deposits to issue public debt, a move that would in turn boost costs for consumer and business borrowers. "The agencies have yet to articulate a clear or meaningful benefit that would offset these significant costs for end users and the financial system," Lauren Anderson, senior vice president and senior associate general counsel at the Bank Policy Institute.

The considerations are still in the early stages and would require approval by the full Federal Reserve Board. The Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency are also involved in the discussions, the WSJ said.

One regional bank that's increasing its size through acquisitions is U.S. Bancorp (USB). It's agreement to acquire MUFG Union Bank from Mitsubishi UFJ Financial (MUFG), though, was extended to the end of the year from Sept. 30.

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