Fed's 'living will' plan may have overlooked possibility of regional bank failures, Systemic Risk Council says

19 July 2019 6:09pm
The US Federal Reserve may have proposed easing “living will” requirements for big regional banks without adequate study of the likelihood of their collapse or the difficulty of unwinding them, the nonpartisan Systemic Risk Council said.

“With so much focus on the very largest institutions since the crisis, it is unclear whether the banking authorities have planned and prepared adequately for the failure of large regional banks,” the Washington-based group headed by Paul Tucker, a former Bank of England deputy governor, said.

In a letter this week, the group said that if a big regional bank collapsed, “[t]here could plausibly be a run on similar banks. If that occurred, the supply of credit and other services would be impaired, with wider costs to the regional or even national economy.”