WASHINGTON Dec 15 The largest U.S. banks will
have to pay as much as $2 billion more a year to insure against
a future market collapse, the U.S. 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
Half of the eight largest U.S. banks would need to issue
roughly $50 billion in fresh debt to satisfy the new standard,
known as Total Loss Absorbing Capacity (TLAC), according to Fed
Taken together, the eight banks' overall annual funding
costs are set to increase by between $680 million and $2
billion, the Fed has said.
Fed officials declined to identify the four banks that lack
sufficient debt. Wells Fargo & Co said in November it
envisioned issuing at least an additional $29 billion in debt to
satisfy the rule.
Large banks were already making significant strides to
satisfy the new rule, Fed officials said.
The final rule issued on Thursday largely upholds a draft
issued early this year, but with a few concessions to the
Much existing debt will be counted towards satisfying the
new rule, the Fed said, a process known as 'grandfathering'.
"This grandfathering should significantly reduce the burden
of complying with the requirements," the Fed said in a
Besides Wells Fargo, the banks expected to satisfy the new
rule are JPMorgan Chase & Co, Bank of America Corp
, Citigroup Inc, State Street Corp, Bank of
New York Mellon Corp, Morgan Stanley and Goldman
Sachs Group Inc.
Some of the largest subsidiaries of foreign banks must also
(Reporting By Patrick Rucker in Washington; Additional
reporting by Dan Freed and David Henry in New York; Editing by