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Mashal Shah

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On August 29, at a Board Meeting for the Federal Deposit Insurance Corporation (FDIC), Comptroller of the Currency Michael J. Hsu issued a statement supporting the insured depository institution (IDI) Resolution Plan Rule, which would require covered banks to develop and submit detailed plans demonstrating how they could be resolved in an orderly fashion in the event of receivership. Describing the impetus for this rule, Comptroller Hsu stated, “as the large bank failures of this spring have shown, banks and regulators cannot afford to be complacent when it comes to resolution.”

On August 29, the Board of Governors of the Federal Reserve System (Federal Reserve), Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (collectively, the agencies) issued a notice of proposed rulemaking with request for public comment on a proposal that would require banks with total assets of $100 billion or more to maintain a layer of long-term debt. The stated objective of the proposed rule is to “improve the resolvability of these banking organizations in case of failure, reduce costs to the Deposit Insurance Fund, and mitigate financial stability and contagion risks by reducing the risk of loss to uninsured depositors.” This proposal follows an advance notice of proposed rulemaking issued in October 2022 by the Federal Reserve and the FDIC that looked at several possible changes, including a long-term debt requirement to promote more orderly resolutions for large banks.

On June 14, the Office of the Comptroller of the Currency (OCC) published the spring edition of its Semiannual Risk Perspective, which discusses key issues facing banks. The good news is that the federal banking system saw historic growth in net interest income in 2022. However, rising interest rates weigh on other aspects of bank performance, such as noninterest income, as mortgage activity continues to slow.