Regional Banks Face Another Hit As Regulators Force Them To Raise Debt Levels

• U.S. regulators on Tuesday unveiled plans to force regional banks to issue debt and bolster their so-called living wills. This comes as steps meant to protect the public in the event of more failures.
• The steps are part of regulators’ response to the regional banking crisis that flared up in March, ultimately claiming three institutions and damaging the earnings power of many others. In July, the agencies released the first salvo of expected changes, a sweeping set of proposals meant to heighten capital requirements and standardize risk models for the industry.
• The requirements will create “moderately higher funding costs” for regional banks, the agencies acknowledged. That could add to the industry’s earnings pressure after all three major ratings agencies have downgraded the credit ratings of some lenders this year.
• All American banks with at least $100 billion in assets would be subject to the new requirements, which resemble rules that apply to the world’s biggest banks.
• Impacted lenders will have to maintain long-term debt levels equal to 3.5% of average total assets or 6% of risk-weighted assets, whichever is higher, according to a fact sheet released Tuesday.

(Source: CNBC)