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Serving as the official blog of the Financial Services Forum, BankNotes is where our team analyzes and discusses the latest proposals, ideas, and news surrounding our eight member institutions, the U.S. financial sector, and the economy. Our goal is to provide thoughtful insights on the issues impacting the eight largest and most diversified U.S.-based financial institutions, as we promote policies that support savings and investment, deep and liquid capital markets, a competitive global marketplace, and a sound financial system.

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13 Feb 2019
Read Time 4 mins

At the end of 2018, the Federal Reserve issued its inaugural Financial Stability Report. The report recognizes that the banking system is an important source of financial stability for the economy and largely focuses on the significant increase in bank capital that has taken place over the past decade. Indeed, as depicted in the report and shown below in Figure 1, large bank capital ratios have roughly doubled since 2009.

Source: Federal Reserve 2018 Financial Stability Report, available at https://www.federalreserve.gov/publications/files/financial-stability-report-201811.pdf


While this improvement in large bank capital should not go unnoticed, it is also important to recognize other ways in which the resiliency of large banks has improved.  In January, the Federal Reserve’s rule on total loss absorbing capacity, or “TLAC,” became effective.  This rule requires Forum members – and only Forum members – to issue long-term debt to external third parties to further bolster their resiliency.  The long-term debt required under the TLAC rule bolsters the resiliency of Forum members for three important reasons.

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