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August 28, 2023

FDIC’s Proposals for Large Bank Resolutions Are Welcome, But Woefully Inadequate to Protect Main Street and the Economy from Another Crisis

WASHINGTON, D.C.— Dennis M. Kelleher, Cofounder, President and CEO, issued the following statement in connection with Federal Deposit Insurance Corporation (FDIC) anticipated proposal of long-term debt requirements and resolution plans for so-called domestically systemically important banks (DSIBs):

“The failures of three large banks earlier this year, the overall financial panic that followed, and the need for more than $30 billion in bailouts proved yet again that there are still too many too-big-to-fail financial firms threatening Main Street families and the American economy. The disorderly collapse of those DSIBs also proved that the regulations required by the Dodd-Frank Act to prevent these events failed to work, largely but not wholly due to the Trump administration’s deregulation juggernaut, as Better Markets and others detailed would happen.

“Moreover, the failure of banking regulators to orderly resolve those DSIBs, which were about 1/10th the size of the largest globally systemically important banks (“GSIBs”), highlight the likely impossibility of doing so with the largest banks in the world like JPMorgan Chase, Bank of America and others.  Put differently, regulators have failed in the primary objective of the Dodd-Frank Act: removing the catastrophic threat to the country from these giant banks.

“That’s why it is imperative that regulators finalize requirements for DSIBs that would make their orderly resolution more likely and reduce the resulting market contagion, financial instability, and taxpayer bailouts. However, this work cannot and should not be done in isolation; it must be accompanied by changes that strengthen the financial resilience of the largest banks – DSIBs and GSIBs – before they fail, including implementing higher capital requirements and strengthening the Federal Reserve’s stress testing program.

“Better Markets also supports the strengthening and application of other requirements currently in place for GSIBs to DSIBs to improve resolution preparedness and planning. Both GSIBs and DSIBs should be required to submit full resolution plans frequently and prepare for the separability of material subsidiaries in the event of severe distress.  Additionally, there simply has to be more public transparency into the resolution planning process. Without transparency, shareholders and markets are left in the dark. Not only does a lack of transparency prevent market discipline, but it also likely leads to mispricing assets, activities, and risk.  As Consumer Financial Protection Bureau Director Rohit Chopra stated following the assessment of GSIB resolution plans last fall, ‘The law requires us to judge if the plans will work in a court-supervised bankruptcy proceeding. As of now, this seems like a fairy tale. Ending “too big to fail” continues to be a goal, but it is not yet a reality.’ It is long past time to make it a reality and banking regulators must make it so.

“Finally, we do not support requirements for minimum amounts of so-called total loss-absorbing capacity in the form of long-term debt (“TLAC Debt”) to achieve those goals, either for GSIBs or DSIBs as the FDIC is now proposing. TLAC Debt requirements are very likely ineffective for several reasons, including: (1) They de facto acknowledge that minimum capital requirements are not high enough and place unearned faith in the possibility of a smooth resolution of a failing DSIB; (2) Contagion risk stemming from uncertainty about, and actual losses, on TLAC Debt issued by failing DSIBs is dangerous and destructive, and is made worse when this debt is held by large and interconnected financial institutions; (3) Political pressure to shield retail investors holding TLAC Debt in the event of a potential LBO failure may not have the expected effect of limiting too-big-to-fail risk; (4) DSIBs’ liquidity positions may be compromised if they have to increase debt issuance to meet minimum requirements; and (5) DSIB leverage is increased if TLAC Debt issuance is not accompanied by increased capital.

“With those guideposts, we look forward to reviewing the proposals in more detail and filing a comment letter at the appropriate time.”


Better Markets is a non-profit, non-partisan, and independent organization founded to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit




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