The Federal Deposit Insurance Corp. proposed new regulations today that would require banks to provide more information on their financial health and preview how they would break up their assets if they found themselves on the brink of failure.
The FDIC’s new rules would require banks with assets of $10 billion and up to hold annual, self-administered stress tests, Bloomberg Businessweek reported.
The Federal Reserve proposed its own set of new rules for banks in December, the Los Angeles Times reported. The FDIC’s company-led stress-test requirement would be in addition to the Fed’s requirement that banks with $50 billion or more in assets undergo a stress test run by the Fed.
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The FDIC will also require banks with $50 billion or more in assets to share so-called living wills, which describe how a bank would break up its assets if the bank was in danger of failing, the LA Times reported. The 37 banks affected by the living-wills rule hold about 61 percent of US insured deposits as of Sept. 30, 2011, according the LA Times.
“Both the FDIC and the institutions being tested will benefit from the forward-looking results that the stress tests will provide,” acting FDIC Chairman Martin J. Gruenberg said, according to Bloomberg Businessweek. “The results will assist in ensuring an institution’s financial stability by helping to determine whether it has sufficient capital levels to withstand a period of economic stress.”
According to the Wall Street Journal:
Both the Fed and the FDIC rules are now open to public comment, after which regulators will decide whether to make changes before issuing a final rule. Another bank regulator, the Office of the Comptroller of the Currency, plans to release its own stress-test proposal soon.
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