OCC Extends Deadline for Comments for Long-Term Debt Rule

The Office of the Comptroller of the Currency (OCC) has extended the comment period on its proposed rule for large banks to hold long-term debt.

The rule would require banks with total assets of $100 billion or more to maintain a layer of long-term debt.

The deadline for comment was originally set as November 30 and has been extended to January 16, 2024.

It said it extended the deadline to allow interested parties more time to analyze the issues and prepare their comments.

The regulator said this would improve financial stability by increasing the resolvability and resiliency of such institutions.

The proposed rules would provide a three-year phase-in period and would also allow certain outstanding long-term debt to count toward the minimum requirements, providing banks with a reasonable transition period.

OCC said the recent failures of three large banks have underscored the importance of supplementary, loss absorbing resources that regulators can use to resolve banks in a way that reduces costs and the risk of disruption to the banking system.

It said that by requiring each large bank to maintain a minimum amount of long-term debt to absorb losses, the proposal would increase the options available to resolve problems in banks facing failure.

Additionally, it argued that by reducing the risk that uninsured depositors would face losses, long-term debt can reduce the speed and severity of bank runs and limit the risk of contagion when a bank is under stress.

The proposal is designed to address the risks specific to large banks that are not global systemically important banks (GSIBs) and would not materially change the existing requirements already in place for GSIBs.