The Federal Reserve has taken another profoundly misguided step in making it easier for Covered Banks to continue distributing capital in the form of dividends and paying discretionary bonuses to executives. It comes on the heels of a similar rule recently issued by the banking regulators that applied to the capital requirements. This time, the rule relaxes restrictions under the TLAC or “Total Loss-Absorbing Capacity” rule. As before, it is an unnecessary, counterproductive, and potentially risky move as bank profits plummet; their TLAC buffers could fall below important thresholds; and enormous uncertainty looms over the future direction of the economy as the COVID-19 pandemic unfolds. This is precisely the wrong regulatory approach at exactly the wrong time. Read our full comment letter here or by clicking the button below.
May 11, 2020
Better Markets Issues Comment Letter on Another Misguided Rule that Will Help Banks Shed Capital for Dividends and Bonuses at Just the Wrong Time