Washington, D.C. (Aug. 29, 2023) — The Independent Community Bankers of America (ICBA) today commended the Federal Deposit Insurance Corp. board of directors for proposing debt requirements for banks over $100 billion in assets. Today’s proposal aligns with ICBA’s support earlier this year for a separate FDIC and Federal Reserve Board proposal to enhance long-term debt standards for large institutions, which would enhance financial stability by providing a wider range of options to resolve these institutions in the event of financial instability.
“The failures this year of Silicon Valley Bank and Signature Bank of New York demonstrate that large banks over $100 billion should be required to maintain long-term debt with characteristics similar to those required for global systemically important banking organizations,” ICBA President and CEO Rebeca Romero Rainey said. “As ICBA has long said, applying stricter capital, debt, and resolution standards on the largest banks will reduce risks to the Deposit Insurance Fund and help address the nation’s too-big-to-fail problem while allowing community banks to continue meeting the needs of local customers and communities.
In its comment letter to the FDIC and Federal Reserve in January, ICBA said requiring large institutions to maintain minimum outstanding amounts of long-term debt and total loss-absorbing capacity, or TLAC, would reduce the chances that the failure of any of these institutions would overwhelm the Deposit Insurance Fund, destabilize the financial system, and require extraordinary intervention by the government — reducing the risks posed by too-big-to-fail institutions. ICBA also said this extra layer of loss-absorbing capacity would address risks posed by these banks’ increased reliance on large uninsured deposits, international activity, and nonbank operations.
Meanwhile, ICBA continues calling on Washington to ensure new policies continue to distinguish large banks that pose systemic risk to the financial system from the thousands of local community banks that continue to appropriately manage risk and do right by their customers and communities. ICBA has commended regulators for proposing new capital and debt requirements that would apply to banks over $100 billion or more in assets, and it expressed strong support for the FDIC’s proposal to exempt the vast majority of community banks from its special assessment and to tie assessments to applicable financial institutions’ estimated uninsured deposits.
The Independent Community Bankers of America® creates and promotes an environment where community banks flourish. ICBA is dedicated exclusively to representing the interests of the community banking industry and its membership through effective advocacy, best-in-class education, and high-quality products and services.
With nearly 50,000 locations nationwide, community banks constitute roughly 99 percent of all banks, employ nearly 700,000 Americans and are the only physical banking presence in one in three U.S. counties. Holding nearly $5.9 trillion in assets, over $4.9 trillion in deposits, and more than $3.5 trillion in loans to consumers, small businesses and the agricultural community, community banks channel local deposits into the Main Streets and neighborhoods they serve, spurring job creation, fostering innovation and fueling their customers’ dreams in communities throughout America. For more information, visit ICBA’s website at www.icba.org.