January 10, 2018

The Federal Reserve Bank of Minneapolis (Minneapolis Fed) released the final Minneapolis Plan to end too-big-to-fail (TBTF). This plan makes a stronger case than the draft plan, for raising capital requirements for the largest banks while drastically reducing burden on the smallest banks. Enacting the Minneapolis Plan would reduce the 100-year chance of a crisis—from the current risk of 67% to only 9%—while generating substantial benefits relative to costs.

The Minneapolis Fed had released a draft plan in late 2016 and invited public and expert review and feedback. The comments confirm that the fundamental analysis and recommendations were correct. New analyses by experts (who are unrelated to the Minneapolis Plan effort) during the review period also support and call for capital requirements similar to those recommended in the Minneapolis Plan. The final plan provides significantly more detail on the recommendation to right-size the supervision and regulation of community banks. The plan would fundamentally change the nature of community bank supervision, effectively limiting supervision to the aspects of community banking that pose real risk. The plan brings that same approach to bank regulation, changing community bank rules on capital requirements, appraisals, data collection, some Dodd-Frank requirements, and other areas. The Minneapolis Plan includes four steps to strengthen the financial system:

  • Dramatically increase common equity capital for banks with assets exceeding USD 250 billion.
  • Call on the U.S. Treasury Secretary to certify that individual large banks are no longer systemically important or else subject those banks to extraordinary increases in capital requirements—up to 38% over time.
  • Prevent future TBTF problems in the shadow financial sector by imposing a tax on the borrowings of shadow banks with assets over USD 50 billion.
  • Reduce unnecessary regulatory burden on community banks.

 

Related Link: Press Release

Keywords: Americas, US, Banking, TBTF, Minneapolis Plan, Proportionality, Minneapolis Fed

Related Articles
News

FSB to Evaluate Effects of Too-Big-To-Fail Reforms for Systemic Banks

FSB is seeking feedback as part of its evaluation of the effects of the too-big-to-fail reforms for banks.

May 23, 2019 WebPage Regulatory News
News

APRA Releases Minor Changes to Reporting Standards on SA-CCR for Banks

APRA released minor changes to the three reporting standards for the standardized approach for measuring counterparty credit risk exposures (SA-CCR).

May 22, 2019 WebPage Regulatory News
News

APRA on Industry Self-Assessments into Governance and Accountability

APRA released an information paper analyzing the self-assessments performed by 36 of the country’s largest banks, insurers, and superannuation licensees in response to the final report on the Prudential Inquiry into the Commonwealth Bank of Australia (CBA).

May 22, 2019 WebPage Regulatory News
News

PRA Consults on Maintenance of TMTP Under Solvency II

PRA published a consultation paper (CP11/19) that sets out its approach to update supervisory statement (SS6/16) on maintenance of the transitional measure on technical provisions (TMTP) under Solvency II.

May 22, 2019 WebPage Regulatory News
News

APRA Proposes to Amend Guidance on Residential Mortgage Lending

APRA is consulting on revisions to the prudential practice guide APG 223 on residential mortgage lending in Australia.

May 21, 2019 WebPage Regulatory News
News

IASB Proposes Improvements to IFRS 9 and IFRS 16

IASB published the exposure draft ED 2019/2 that proposes amendments to four IFRS standards, including IFRS 9 on Financial Instruments and IFRS 16 on Leases.

May 21, 2019 WebPage Regulatory News
News

Denis Beau of BDF on Supervisory Priorities for Climate-Change Risks

Denis Beau, the First Deputy Governor of BDF, delivered opening remarks at the BCBS-BSCEE-FSI High-level Meeting for Europe on banking supervision.

May 21, 2019 WebPage Regulatory News
News

ISDA CDM to be Deployed for UK Digital Regulatory Reporting Pilot

ISDA announced deployment of the ISDA Common Domain Model (ISDA CDM 2.0) to support the UK FCA, BoE, and participating financial institutions in testing phase two of the Digital Regulatory Reporting pilot for derivatives.

May 21, 2019 WebPage Regulatory News
News

MAS to Consolidate Regulation of Merchant Banks Under Banking Act

MAS published a consultation paper that proposes to consolidate the regulation of merchant banks under the Banking Act and to move merchant banks to a licensing regime under the MAS Act.

May 21, 2019 WebPage Regulatory News
News

ESAs Amend Technical Standards on Mapping of ECAIs Under CRR

ESAs published a second amendment to the implementing technical standards on the mapping of credit assessments of External Credit Assessment Institutions (ECAIs) for credit risk under the Capital Requirements Regulation (CRR).

May 20, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 3118